“Two is better than one” basically this concept is foundation of a traditional partnership firm where two or more persons get together to carry on some lawful business and share profit and loss among themselves as agreed upon by them. Partnership Firm as a form of business which has its own restriction and have limited reach among public, in order to enhance the business through partnership a hybrid form of business structure was introduced that has basic features of partnership merged with the features of a Company.

1. Concept of
LLP & it’s
Incorporation

2. Introduction
2
“Two is better than one” basically this concept is foundation of a traditional partnership firm where two or more persons get
together to carry on some lawful business and share profit and loss among themselves as agreed upon by them.
Partnership Firm as a form of business which has its own restriction and have limited reach among public, in order to enhance
the business through partnership a hybrid form of business structure was introduced that has basic features of partnership
merged with the features of a Company.

3. Enactment of LLP Act
3
Business in form of LLP is not a new concept, countries like UK, USA, Australia, Japan has already practicing business in form of
LLP before its introduction in India as a form of business.
In India, The Limited Liability Partnership Bill, 2006 was introduced in the Rajya Sabha on 15 December, 2006 and was referred
to the Standing Committee on Finance on 27 December, 2006 by the Hon’ble Speaker, in consultation with Chairman, Rajya
Sabha for examination and report thereon. This was passed by the Rajya Sabha on 24th October, 2008. The Bill was passed by
Lok Sabha on 12th December, 2008
It received assent of the President of the India on 7th January 2009 as Limited Liability Partnership Act, 2008 and has been in
effect since 31 March 2009.

4. Advantages of LLP
4
The basic intent of creating such new form of business is to overcome the limitations of partnership firm such as liability of
partners are unlimited and their personal property can also be attached in case of any legal dispute.
Some of the advantages of incorporating a LLP are summarised below:
1. LLP is a body corporate having a separate legal entity and perpetual succession.
2. Being regulated by an Act, it provides more sense of security to its partners and other stakeholders of the LLP.
3. It enjoys organisational flexibility in its operation since its internal working is governed through a deed which can be
modified as per the mutual will of all partners.
4. LLP gets priority in funding from private investor or banks over sole proprietorship or partnership.
5. Incorporation of LLP does not require much hassle and easily gets incorporated.
6. LLP structuring suits in various industries like small enterprise, professional group, services sector etc.
7. Incorporating a LLP does not require any minimum capital for contribution.

5. How LLP is Structured & Managed?
5
A partnership arrangement between two or more than two partners who gets them registered under The Limited Liability
Partnership Act, 2008 whereby partners intends to carry an objective clearly mentioned through an agreement is known as an
arrangement of Limited Liability Partnership. Below given are some features of LLP as provided under LLP Act, 2008 (“Act”):
1. Status of body corporate: Section 3 of the Act states that LLP is a body corporate which enjoys status of separate legal
entity and perpetual succession.
2. Designated Partners & Partners: LLP shall have at least two designated partners who are individuals and at least one should
be resident in India as per section 7 of the Act further Body corporates can also be partners of LLP where nominee of such
body corporates will be considered as designated partner.
3. LLP Agreement: All the mutual rights and liabilities of partners will be governed by LLP agreement including its objectives,
duties, termination and other important clause as per definition of LLP agreement given under section 2(o) of the Act.
4. Relationship of Partners: The mutual rights and duties of the partners of LLP and LLP and its Partners will be governed by
LLP agreement as defined under section 23 of the Act.

6. How LLP is Structured & Managed?
6
5. Contribution: The contribution of each partner shall be accounted for and disclosed in the accounts of LLP along with its
nature and amount. Contribution can be tangible or intangible, movable or immovable including money, promissory notes
and other agreement to contribute cash or property as per section 32 of the Act.
6. Responsibility of Designated Partners: Designated partner of the LLP is basically responsible for overall functioning and
management of the LLP including intimation to Registrar in any change in LLP, Filing annual return, statement of assets and
liability etc. and they shall be liable for strict penal provision in case of non-compliance by the LLP.
7. Partner Status: As per section 26 of Act, every Partner of LLP is agent of LLP for the purpose of carrying business of LLP.
8. Liability of Partners: Partners are not held personally liable for the reason of being partners, unless they have acted without
authority and breached clauses of partnership by wrongful act as per section 28 of the Act.
9. Liability of LLP: In accordance with section 27(1) of the Act, LLP is not bound by anything done by its partners outside
scope of their authority however if partners exercising their authority acts illegally than LLP will be liable for the wrongful
acts of the partner.

7. How LLP is Structured & Managed?
7
10. Maintenance of Books and Accounts: LLP shall maintain proper books of account on cash or accrual basis and as per
double entry system of accounting at its registered office address in accordance with section 34 of the Act.
11. Audit: The accounts of every LLP shall be audited in accordance with section 34 of the Act and Rule 24 of LLP, Rules 2009
(“Rules”). As per rule 24 of LLP Rules 2009 below given is the criteria for LLP to conduct audit:
Turnover>Rs. 40 Lakhs
Contribution>25 lakhs
If any LLP want to gets its account audited even if the limit is not exceeding, it can do so after following rules given in LLP
Rules 2009.
12. Obligation of LLP to intimate events to the Registrar: As we know management and administration of LLP is governed
through LLP Act 2008 and it mandate LLP to make disclosures and give proper intimation of events occurring in LLP.

8. Process for LLP Incorporation
8
Section 4 of the Act and rule 11 of the Rules states for procedure for incorporation of a LLP which is represented as below:
1. Apply for Digital Signature of proposed partners of the LLP, generally class 2 DSC serves the purpose for filing forms at the
portal of Ministry of Corporate Affairs.
2. Ascertain name of the LLP and check the availability of the same in accordance with section 4 of the Act and Rule 18 of
the Rules and file name application in Form Run LLP
3. After name approval file LLP-FiLLiP with Central Registration Centre for application of incorporation on LLP and file
relevant documents like subscribers consent, consent of partners, details of LLP etc.
4. Alternatively FiLLiP can be filed for Reservation of Name, application and allotment of DIN and incorporation. Maximum 2
designated partner all are allowed to apply for DIN through this Form.
5. After scrutinising of documents Registrar will approve the incorporation and issue certificate of registration to LLP.
6. After incorporation LLP is required to file Form 3 to file LLP agreement within 30 days from the date of incorporation.

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