How to Incorporate a New Limited Liability Partnership A Limited Liability Partnership may be incorporated as per the procedure explained

below: User Registration Register yourself on the website of Ministry of Corporate Affairs, developed for LLP services, i.e. www.llp.gov.in . This website may also be accessed through the website of the ministry www.mca.gov.in On the home page of the URL www.llp.gov.in click Register tab on top right hand corner of the page. Fill in the registration form. Fields marked * in the form are to be mandatorily filled. Select your user name and password. Upload digital signature certificate On successful registration, system will give a message that you have been registered successfully. Obtain Designated Partners Identification Number (DPIN). All designated partners of the proposed LLP shall obtain Designated Partner Identification Number (DPIN) / Director Identification Number (DIN). DPIN/DIN may be applied from: http://www.mca.gov.in/MCA21/ Din.html . Digital Signature Certificate Partner/Designated partner of LLP/proposed LLP, whose signatures are to be affixed on the e-forms has to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorized certifying agency, details of which are available on the home page of the LLP portal under the tab Certifying Authorities. Reservation of name Log on to the LLP portal by clicking the log in tab on the top right corner of the homepage and enter your username and password. After login, click E-Forms link. Open Form-1 for reservation of name and fill in the details. Select name of the proposed LLP (upto 6 choices can be indicated).

A limited liability partnership (LLP) is a partnership in which some or all part ners (depending on the jurisdiction) have limited liability. It therefore exhibi ts elements of partnerships andcorporations.[1] In an LLP, one partner is not re sponsible or liable for another partner's misconduct or negligence. This is an i mportant difference from that of an unlimited partnership. In an LLP, some partn ers have a form of limited liability similar to that of the shareholders of a co rporation.[2] In some countries, an LLP must also have at least one "general par tner" with unlimited liability. Unlike corporate shareholders, the partners have the right to manage the business directly. In contrast, corporate shareholders have to elect a board of directors under the laws of various state charters. The board organizes itself (also under the laws of the various state charters) and hires corporate officers who then have as "corporate" individuals the legal resp onsibility to manage the corporation in the corporation's best interest. An LLP also contains a different level of tax liability from that of a corporation. Limited liability partnerships are distinct from limited partnerships in some co untries, which may allow all LLP partners to have limited liability, while a lim ited partnership may require at least one unlimited partner and allow others to assume the role of a passive and limited liability investor. As a result, in the se countries, the LLP is more suited for businesses where all investors wish to take an active role in management. There is considerable confusion between LLPs as constituted in the U.S. and that introduced in the UK in 2001 and adopted elsewhere see below since the UK LLP i s, despite the name, specifically legislated as a Corporate body rather than a P artnership.

India The Limited Liability Partnership Act 2008 was published in the official Gazette of India on January 9, 2009 and has been notified with effect from 31 March 200 9. However, the Act, has been notified with limited sections only.[4] The rules have been notified in the official gazette on April 1, 2009. The first LLP was i ncorporated in the first week of April 2009. 1. In India, for all purposes of taxation, an LLP is treated like any other part nership firm. 2. be limited to their agreed contribution in the LLP. 3. Further, no partner would be liable on account of the independent or unauthor ized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner's wrongful business decisions o r misconduct. 4. LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be app licable to LLPs and there shall not be any upper limit on number of partners in an LLP unlike an ordinary partnership firm where the maximum number of partners can not exceed 20, LLP Act makes a mandatory statement where one of the partner to the LLP should be an Indian. 5. Provisions have been made for corporate actions like mergers, amalgamations e tc. 6. While enabling provisions in respect of winding up and dissolutions of LLPs h ave been made, detailed provisions in this regard would be provided by way of ru les under the Act. 7. The Act also provides for conversion of existing partnership firm, private li mited company and unlisted public company into a LLP by registering the same wit h the Registrar of Companies (ROC) 8. Nothing Contained in the Partnership Act 1932 shall effect an LLP. 9. The Registrar of Companies (Roc) shall register and control LLPs also. 10. The governance of LLPs shall be in electronic mode based on the successful m odel of the present Ministry of Corporate Affairs Portal. Visit LLP Portal to re gister a new LLP.

Meaning of LLP & its Objectives Limited Liability Partnership (LLP): l LLP is a partnership formed and registered under LLP Act. (A hybrid of partnership firm and company.) Objectives of formation of LLP: LLP will be a new corporate form of doing business and profession. l I m p o r t a n t v e h i c l e t o c a t e r t o t h e o f professionals, small-scale sector and venture capital funds as well as innovative business models which would lead to setting up of multi-disciplinary partnerships. Nature of LLP l Ministry of Corporate Affairs is the administrative ministry and Registrar of Companies is the administrative authority. l LLP is a body corporate having perpetual succession and is a legal entity separate from its partners. Any change in the partners shall not affect the existence, rights or liabilities of LLP. LIMITED LIABILITY PARTNERSHIP ACT, 2009 CA. R G Sarda, B.Com (Hons), FCA, PGDADR, DISA (ICAI) Any individual (who is of sound mind and is solvent) or body corporate can be a partner of LLP. l Every LLP shall have at least two Designated Partners who must be individuals and at least one of them shall be a

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resident in India. If a body corporate is partner of LLP, it can nominate a person as Designated Partner. l P r i o r C o n s e n t o f a n i n d i v i d u a l i s r e q u i r e d f o r h i s appointment as 'Designated partner'. Every designated partner will obtain a Designated Partner Identification Number (DPIN) from the Central Government. l Every designated partner shall be responsible in respect of compliance of the provisions of LLP Act. l LLP is required to appoint Designated Partner within 30 days of vacancy, if any. If it is not so appointed or there is only one Designated Partner, each partner shall be deemed to be a Designated Partner. l Designated Partner has no implied authority to conduct day to day business of LLP. It can be given through LLP Agreement. Incorporation of LLP l Two or more persons can associate for carrying out any lawful business with a view to profit. The incorporation d o c u m e n t s c o n t a i n i n g d e t a i l s l i k e n a m e , p r o p o s e d business, name & address of partners and designated partners etc., required to be filed with the RoC. l RoC shall register the incorporation document and issue Certificate of Incorporation. l Every LLP shall have a registered office. l Every LLP shall have either the words "Limited Liability Partnership or "LLP" as last words of its name. Effect of Registration On registration, LLP shall be capable of suing and being sued; acquiring, owning, holding or disposing of property; having a common seal, if it decides to have one and doing such other acts and things as bodies corporate may lawfully do. Partners and their relations A f t e r i n c o r p o r a t i o n , L L P m a y h a v e L i m i t e d L i a b i l i t y Partnership Agreement. This agreement will govern the mutual rights and duties of partners and mutual rights and duties of LLP and its partners. In the absence of such agreement, mutual rights and duties of partners and LLP shall be determined in accordance with the provisions of First Schedule. l A person may cease as a partner in accordance with agreement or by giving a notice of at least 30 days to other partners of his intention to resign as a partner. l A person ceases to be partner on his death or dissolution of LLP or if he is declared of unsound mind or adjudged as insolvent. l LLP shall file notice with the RoC within 30 days from the date on which a person becomes or ceases to be a partner or from any change in the name and address of a partner. l A person who ceases to be partner, may also file notice of his resignation within 30 days. A new partner can be admitted only with consent of all existing partners, as per First Schedule. However, LLP Agreement may provide otherwise. l A partner can not be expelled from LLP unless there is specific provision in LLP Agreement.

Limitation of Liability of LLP and partners l Every partner of LLP is agent of LLP but not of other partners. l LLP will be liable if a partner of LLP is liable to any person as a resul t of wrongful act in the ordinary course of business. l Obligations of LLP shall be solely the obligation of LLP and shall be met out of the property of LLP. l Partner will be personally liable only for his wrongful act and not of other partners. l Holding Out - If a person represents himself as partner of LLP, he will be liable to person who acts in good faith on basis of such representation. l In case of an act by LLP or its partner with intent to defraud creditors or other person or any fraudulent purpose, liability of LLP and concerned partner shall be unlimited. An employee or partner can provide information about any wrong doing of LLP. In such case, penalty on him will be r e d u c e d b y T r i b u n a l a n d h e c a n n o t b e s c h a r g e d , d e m o t e d o r h a r a s s e d b e c a u s e o f p r o v i d i s u c h information. Contribution to Capital l A partner can contribute to the capital of LLP either in terms of money, property or contract for services. l Monetary value of contribution of each partner shall be accounted for and losed in the accounts of LLP. l In absence of any contrary provision in LLP Agreement, all partners are entitled to share equally in capital, profits and losses of LLP. Financial Disclosures l Each LLP is requi red to maintain books of accounts. Accounts should be audited, unless exempted by Central Government. l Statement of Account and Solvency shall be prepared within 6 months of close of financial year and filed with RoC within prescribed time. l Annual Return shall be filed with RoC within 60 days of closure of financial year. l Non-filing of these financial disclosures attracts very heavy fines on the Designated Partners. Transfer of Partnership Rights R i g h t o f a p a r t n e r t o s h a r e p r o f i t o r s s o f L L P i s transferable either wholly or in part. However, transferee is n o t e n t i t l e d t o p a r t i c i p a t e i n ma n a g eme n o r a c c e s s information regarding transactions of LLP. A SOFT ANSWER TURNETH AWAY WRATH.11 A R T I C L E APRIL 2009 Investigation Affairs of LLP can be investigated by Central Govt. in the following cases: Not less than 1/5th partners make an application along with supporting evidence and security amount as prescribed. The LLP makes an application that the affairs of it ought to be investigated In the opinion of Central Govt, there are circumstances suggesting that

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i. The business is being or has been conducted with an intent to defraud creditors or partners or others. ii. The affairs are not conducted in accordance with the LLP Act iii. On receipt of repor t of the Regist rar or any other investigating or regulatory agency it appears that the affairs of LLP ought to be investigated. Conversion to LLP l A firm, a private company and unlisted public company may convert itself into LLP. l RoC shall issue certificate of registration, on satisfying that all the provisions of the Act and related Schedules have been complied with. S u c h L L P s h a l l i n f o r m t h e R e g i s t r a r i r m s o r Registrar of Companies about such conversion within 15 days of the date of registration. l All property of firm or company shall vest in LLP. Compromise or Reconstruction l Compromise or arrangement can be made between LLP and its creditors or LLP and its partners. l On the application of LLP or creditor or partner, Tribunal may order a meeting of the creditors or partners to be held. l If majority (3/4th in value) of creditors or partners agree to such compromise at the meeting, such compromise shall be binding on all the creditors or partners, if sanctioned by the Tribunal. l An order made by the Tribunal shall be filed with the RoC within 30 days. Winding up and Dissolution l Winding up of LLP may be either voluntary or by the order of the Tribunal. LLP may be wound up in the following six circumstances: a. if LLP decides that it should be wound up; b. if number of partners is reduced below 2, for a period of more than 6 months; c. if LLP is unable to pay its debts; d. if LLP has acted against the sovereignty & integrity of India; e. If LLP has made default in filing financial disclosure for five consecutive financial years and f. If Tribunal is of opinion that it should be wound up. Miscellaneous Provisions l A partner may lend money to LLP and shall have same rights and obligations as a creditor. l Central Govt. can make applicable any provisions of the Companies Act, 1956 with suitable modifications. l Fee for late filing of document is Rs. 100 per day. Late filing upto 300 days is permissible. RoC can strike off defunct LLP after giving a reasonable opportunity for hearing. Comparative Analysis H H Traditional Partnership Unlimited personal liability of each partner for dues of the partnership firm. Personal assets of each partner also liable. Partnership is registered under partnership Act. Registration is not mandatory. Not a legal entity separate from its partners. Partnership deed is executed. Minimum 2 and maximum 20 partners

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Documents are required to be filed with registrar of firms (of respective states) All partners are liable for statutory compliances. Partner can not enter into business with firm. Every partner of firm is agent of firm and also of other partners. Limited Liability Partnership Limited liability. No personal liability of partner, except in case of fraud. L L P i s i n c o r p o r a t e d u n d e r L L P B i l l . r p o r a t i o n i s mandatory. It is a legal entity separate from its partners. 'Incorporation Document' is required to be executed. LLP Agreement is required in almost all cases, though it is not mandatory. Minimum 2 and no limit on maximum number of partners. ROC is the administrating authority. Only Designated Partners are liable for statutory compliances. Partner of LLP can enter into business with LLP. Every partner of LLP is only agent of firm. H ONE CAN NEVER BE TOO THIN OR TOO RICH.12 A R T I C L E APRIL 2009 Filing of Accounts and Statement of Solvency and Annual Return are not required. Partnership firm can be dissolved. Filing of Accounts and Statement of Solvency and Annual Return are required. LLP can be wound up. Comparative Analysis Company Memorandum is to be filed with RoC. Memorandum should contain the name of State where registered office is situated. Name to contain 'Limited or 'Private Limited' at the end. Articles are to be filed at the time of incorporation. Managing Director to look after day to day administration. Restriction on remuneration payable to the Directors. Limited Liability Partnership Incorporation document is required to be filed. Incorporation document is not required to contain name of the State. Name to contain 'Limited Liability Partnership or 'LLP' at the end. LLP Agreement is to be filed later on. In its absence, provisions of First Schedule shall apply. Designated Partner to look after statutory compliances. All partners can look into affairs of LLP. No restriction on remuneration to partner. It should be provided in LLP Agreement. STEPS FOR CONVERSION OF PARTNERSHIP TO LLP A partnership firm may apply to convert into LLP if and only if the partners of the LLP to which the partnership firm is to be converted, comprise all the partners and no one else. Any changes in partners can be done after conversion only. 1. Apply in Form 1 for reservation of name. 2. Apply in Form 17 for conversion to LLP with the following attachments: Consent of all partners in the format prescribed.

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Incorporation document in Form 2 Declaration for incorporation of LLP in Form 3 Statement of Assets and Liabilities of partnership firm List of all creditors along with their consent Authorization to make declaration by all the partners in favor of a designated partner of LLP. On conversion ROC will issue a certificate of registration in Form 19. The LLP shall inform the concerned Registrar of Firms about the conversion into LLP in Form 14 within 15 days of conversion. EFFECTS OF CONVERSION 1. The firm shall be deemed to be dissolved and name shall be removed from the register of firms. 2. All properties, assets, interests, rights, privileges, H H liabilities, obligations of the firm are transferred to LLP. In cases of immovable and movable assets registered with any authority the LLP as soon as possible after the date of registration take all necessary steps to notify the authority of the conversion. 3. The conversion does not affect the existing liabilities, obligations, agreements, contracts and continuation of employment. 4. The LLP shall replace the firm in the following cases: pending proceedings by or against the firm any conviction, ruling, judgment or order in favor or against the firm existing agreements, contracts, etc any appointment, authority or power of the firm NOTICE OF CONVERSION IN CORRESPONDENCE T h e L L P s h a l l e n s u r e t h a t f o r a p e r i o d f 1 2 mo n t h s commencing not later than 14 days after the date of registration the letter head of LLP shall clearly indicate that it was converted from a firm to LLP w.e.f. and the name and registration number of the firm from which it was converted. LIABILITIES OF FIRM BEFORE CONVERSION Every partner of a firm that converted into LLP shall continue to be personally liable (jointly and severally with the LLP) for the liabilities of the firm incurred prior to conversion or which arose from any contract entered into prior to conversion.

Accounting At this level of business, stakeholder expectations on your firm will be higher as your small business grows. As a result you need to plan for a good accounting system. Accounts normally fall into two sections: o year end accounts - these are produced annually for the 12 months up to the business year end, say 31 December each year. The primary function is to pro vide figures for your tax returns and to have details of your annual accounts fi led at the registrar of companies. It is fair to say that the vast majority of b usinesses use an accountant to prepare the year end figures. This is because this process is a highly technical area and although you can ass ist in keeping the records accurately and up to date, a qualified accountant can ensure that the accounts are finalized properly and conform with all local and international legislation. o Monthly or quarterly accounts - sometimes known as management accounts, are produced much more frequently for specific purposes. For instance the perfor mance of the business needs to be constantly monitored and outside users such as

banks and other lenders may request this information. These accounts do not generally have to be produced by law but it is important t hat they are as accurate as possible so that the true position of your Limited l iability partnership can be assessed. Again the involvement of a qualified accou ntant will help you in this process. In our professional view, the advantages of combining the characteristics of bot h company and partnership, potential acceptance in the international business ar ena and the prospects of growing your small business against world-class competi tors merits a serious consideration in favor of a limited liability Partnership. Return from limited liability partnership to starting a small business.