Incorporation Of LLP CA Foundation Notes | EduRev

Business Laws for CA Foundation

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CA Foundation : Incorporation Of LLP CA Foundation Notes | EduRev

The document Incorporation Of LLP CA Foundation Notes | EduRev is a part of the CA Foundation Course Business Laws for CA Foundation.
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INCORPORATION OF LLP:

Essential elements to incorporate LLP - Under the LLP Act, 2008, the following elements are very essential to form a LLP in India:

(i) To complete and submit incorporation document in the form prescribed with the Registrar electronically;

(ii) To have at least two partners for incorporation of LLP [Individual or body corporate];

(iii) To have registered office in India to which all communications will be made and received;

(iv) To appoint minimum two individuals as designated partners who will be responsible for number of duties including doing of all acts, matters and things as are required to be done by the LLP. Atleast one of them should be resident in India.

(v) A person or nominee of body corporate intending to be appointed as designated partner of LLP should hold a Designated Partner Identification Number (DPIN) allotted by MCA.

(vi) To execute a partnership agreement between the partners inter se or between the LLP and its partners. In the absence of any agreement the provisions as set out in First Schedule of LLP Act, 2008 will be applied.

(vii) LLP Name.

Limited Liability Partnerships are bodies corporate and must be registered with the Registrar of LLP after following the provisions specified in the LLP Act, in a similar way of setting up a company with distinct name. The LLP cannot have the same name with any other LLP, Partnership Firm or Company.

To create a LLP proper formation documents must be filed with the registrar along with the necessary filing fees.

PROCESS:

Incorporation Of LLP CA Foundation Notes | EduRev


Contents of LLP Agreement:

1. Name of LLP.

2. Name & address of Partners & Designated Partners.

3. Form of contribution & interest on contribution.

4. Profit sharing ratio.

5. Remuneration of Partners.

6. Rights & Duties of Partners.

7. Proposed Business.

8. Rules for governing LLP.


Steps to incorporate LLP-

Incorporation Of LLP CA Foundation Notes | EduRev


DIFFERENCES WITH OTHER FORMS OF ORGANISATION:

Distinction between LLP and Partnership Firm: The points of distinction between a limited liability partnership and partnership firm are tabulated as follows:

Sr. No.
Basis
LLP
Partnership firm
1
Regulating Act
The Limited Liability Partnership Act, 2008.
The Indian Partnership Act, 1932.
2
Body corporate
It is a body corporate.
It is not a body corporate.
3
Separate legal entity
It is a legal entity separate from its members.
It is a group of persons with no separate legal entity.
4
Registration
Registration is mandatory. LLP can sue and be sued in its own name.
Registration is voluntary. Only the registered partnership firm can sue the third parties.
5
Perpetual succession
The death, insanity, retirement or insolvency of the partner(s) does not affect its existence of LLP. Members may join or leave but its existence continues forever.
The death, insanity retirement or insolvency of the partner(s) may affect its existence. It has no perpetual succession.
6
Creation
It is created by a legal process called registration under the LLP Act, 2008.
The death, insanity retirement or insolvency of the partner(s) may affect its existence. It has no perpetual succession.
7
Name
Name of the LLP to contain the word limited liability partners (LLP) as suffix.
No guidelines. The partners can have any name as per their choice.
8
Liability
Liability of each partner limited to the extent to agreed contribution except in case of willful fraud.
Liability of each partner is unlimited. It can be extended upto the personal assets of the partners.
9
Mutual agency
Each partner can bind the LLP by his own acts but not the other partners.
Each partner can bind the firm as well as other partners by his own acts.
10
Designated partners
At least two designated partners and atleast one of them shall be resident in India.
There is no provision for such partners under the Indian partnership Act, 1932.
11
Common seal
It may have its common seal as its official signatures.
There is no such concept in partnership.
12
Legal compliances
Only designated partners are responsible for all the compliances and penalties under this Act.
All partners are responsible for all the compliances and penalties under the Act.
13
Annual filing of documents
LLP is required to file:
(i) Annual statement of accounts
(ii) Statement of solvency
(iii) Annual return with the registration of LLP every year.
Partnership firm is not required to file any annual document with the registrar of firms.
14
Foreign partnership
Foreign nationals can become a partner in a LLP.
Foreign nationals cannot become a partner in a partnership firm.
15
Minor as partner
Minor cannot be admitted to the benefits of LLP.
Minor can be admitted to the benefits of the partnership with the prior consent of the existing partners.


Distinction between LLP and Limited Liability Company (LLC):

Sr. No.
Basis
LLP
LLC
1
Regulating Act
The LLP Act, 2008
The Companies Act, 2013
2
Members/Partners
The persons who contribute to LLP are known as partners of the LLP.
The persons who invest the money in the shares are known as members of the company.
3
Internal governance structure
The internal governance structure of a LLP is governed by agreement between the partners.
The internal governance structure of a company is regulated by statute (i.e., Companies Act, 2013).
4
Name
Name of the LLP to contain the word “Limited Liability partnership” or “LLP” as suffix.
Name of the public company to contain the word “limited” and Private company to contain the word “Private limited” as suffix.
5
Number of members/ partners
Minimum – 2 members
Maximum – No such limit on the members in the Act. The members of the LLP can be individuals/or body corporate through the nominees.
Private company:
Minimum – 2 members
Maximum – 200 members
Public company:
Minimum – 7 members
Maximum – No such limit on the members.
Members can be organizations, trusts, another business form or individuals.
6
Liability of members/ partners
Liability of a partners is limited to the extent of agreed contribution except in case of willful fraud.
Liability of a member is limited to the amount unpaid on the shares held by them.
7
Management
The business of the company managed by the partners including the designated partners authorized in the agreement.
The affairs of the company are managed by board of directors elected by the shareholders.
8
Minimum number of directors/designated partners
Minimum 2 designated partners.
Private Co. – 2 directors
Public Co. – 3 directors


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