Is it necessary to register a Partnership Firm?

The partnership organisation was started with the enactment of Partnership Act, 1907 in England and in India the Partnership Act was initially enacted in 1932. The Act governs the formation, management and control of various activities in partnership. According to Partnership Act, 1932 the partners involved in the business are made unlimitedly liable towards the creditors. Thus, to confine the liability situation and to induce/ encourage more people into business by limiting the liability on the partner Limited Liability Partnership, 2008 was enacted.

Since, partnership involves more than one person it is always recommended to put the terms and conditions of the transactions in writing. By having a written set of agreement the parties’ interest shall be protected.

Table of content

Introduction
Governing Law
Importance of partnership agreement
Incorporation of Partnership
Form 3 – Agreement
Form 2 – Required documents for incorporation
Final words

Introduction

Limited Liability Partnership is an incorporated partnership formed and registered under the Limited Liability Partnership Act, 2008 with Limited Liability and perpetual succession also LLP is a separate legal entity and distinct from its partners. The mutual duties and rights of the partner of an LLP are governed by an agreement entered by the partners.

Governing Law

The business of partnership is governed as per Limited Liability Partnership, 2008 and their registrations in accordance with are dealt with ROC.

Importance of partnership agreement

Partnership agreement plays a vital role in terms of –

Partnership agreement is a bonafide document which states the motive of the business
It is a mutual and legal document and hence helps in satisfies and protects the rights of the partners
Securing the liability of the partners by outlining the same in an agreement
Helps in settling any future quarrels, disputes that might take place in the future
Terms and conditions of the partnership are laid down which to be followed to carry out business
Identifying the roles and responsibilities of the members
The clauses in an agreement shall undergo any ratification only when the parties give their consent and the same has to be brought forth with the ROC.

Incorporation of Partnership

LLP can be incorporated by two or more person associated for carrying on a lawful business with a distinct view to earn profit. The names of the partners shall be entered into the incorporation documents at the time of registration. Incorporation documents shall be filed along with the statement prescribed form by either an advocate or a company secretary or charted accountant.

Agreement

Section 23 of the Act, mandates that the LLP agreement be registered, with such registration of agreement the partiers duties and rights are governed. The agreement shall be made with the prescribed fee which varies in accordance with the capital contribution made to the partnership.

If capital contribution is less than 1 lakh – Fees payable shall be IN50
If capital contribution is 1 lakh – 5 lakh – Fees payable shall be INR 100
If capital contribution is 5 lakh – 10 lakh – Fees payable shall be INR 150
If capital contribution is more than 10 lakh – Fees payable shall be INR 200

Schedule I of LLP agreement determines the details per se mutual rights and duties of the partners and their rights and duties in relation to partnership. Further, LLP agreement is required to be filed with the registrar in Form No. 3 within 30 days of incorporation.

Once, the LLP agreement gets registered, it becomes the document which is accessible through public dominie.

Further, if there’s any change(s) to be made in the agreement, the same has to be intimated and modified via ROC.

The agreement shall have the basic details of the LLP such as

Name of the LLP
Name of the partners and Designated Partners
Form of Contribution (capital contribution)
Profit sharing ratio
Rights and duties of the partners
Purpose of the business
Rules and regulation governing LLP

Required documents for incorporation

The incorporation documents shall be made in form 2

Form 2 or Incorporation document and subscriber’s statement is required to be filed for the incorporation of the LLP. After filing the same has to be submitted with the registrar of the respective state which has the registered/ principle place of business. The registration fees of such LLP shall be based on the capital contribution of the partners

If capital contribution is less than 1 lakh – Fees payable shall be IN 500
If capital contribution is 1 lakh – 5 lakh – Fees payable shall be INR 2000
If capital contribution is 5 lakh – 10 lakh – Fees payable shall be INR 4000
If capital contribution is more than 10 lakh – Fees payable shall be INR 5000

Documents submitted must comply all requirements of the LLP Act, 2008 and such documents shall be made and authenticated either by one Advocate/ Company Secretary/ Charted Accountant who is engaged in the incorporation process of the LLP.

Acquiring Designated Partner Identification Number (DPIN)
Personal details of the partners such as name, address and ID
Details of the designated partners of the partnership
Name of the limited liability partnership
Propose business or business plan of the Limited Liability Partnership
Address of the registered office

Requirements are complied with; the registrar shall within the periods of 14 days and gave the certificate of incorporation to the person whose name has been specified therein.

Acquiring Designated Partner Identification Number (DPIN) and DSC

Every designated partner with legal capacity to an LLP shall be obtain a DIN/ DPIN as per Companies Act. Every designated partner shall intimate his consent to become a designated partner to LLP in Form 9 and the LLP shall intimate such DIN/ DPIN to registrar in Form 4.

Further the designated partner(s) has to obtain DSC in accordance with the Information Technology Act, 2000 which shall be used for authenticating submitted documents electronically.

Partner(s) in LLP

Every LLP shall have at least two designated partners who are individuals and at least one of them shall be a resident in India and according to Section 5 of the LLP Act states that any individual or body corporate may become partners as well.

Details of the partner(s)

Personal details of the partner(s) with their name, address, ID proofs, current status on holding business are to be recorded.

Obligation of partners

Every partner shall act and carry on their respective duty as mentioned in the agreement
The obligation of an LLP shall not affect the personal liability of a partner for his own wrongful act or omission but a partner shall not be personally liable for wrongful act or omission of any other partner
No partner shall be personally liable directly or indirectly for an obligation of LLP for being a partner.

Capital contribution by the partners

Contribution of each partner shall be disclosed in the agreement which accounts the LLP along with the nature contribution. Disqualification of partners.
Contribution of a partner subsisting tangible, intangible property by way of an agreement for the service rendered. The benefits brought in by an agreements shall be valued by a practicing Charted Accountant/ Company Secretary/ Advocate who’s approved by the central government.

According to Section 5 an individual shall not be capable of becoming a partner of a limited liability partnership is –

Person of unsound mind
Minor person without legally appointed guardian
HUF cannot become a partner or designated partner of LLP
Partner becoming insolvent

Name of the limited liability partnership

Every LLP shall have either the word “Limited Liability Partnership or LLP” as the last words of its name. The name shall be unique with n1o trademark infringement and mustn’t use symbols/ emblems/ names as prohibited by the Government of India.

Registrar issue certificate

The ROC (registrar) registers the incorporation document and issues a certificate of incorporation within 14 days.

Registered office and relocation office of LLP

Registration

Every LLP shall have a registered office
Communication and notices shall be addressed to registered office of LLP

Relocation

Accordance with LLP agreement – LLP shall change its registered office from one place to another in accordance with the LLP agreement.
Non inclusive in LLP agreement – with the consent of other partners the registered office shall change the location.

Business plan

Nature of the business/ services which the LLP designated to provide shall be mentioned, services such as –

Involved person who’s providing the service
Kind of service (Charted Accountant/ Advocate/ Company Secretary)
Small Sector Enterprises (MSME)
Producer Company such as Handlooms, Handicraft etc.
Professionals and enterprises engaged in scientific, research, technical disciplinary.

Final words

Though the partnership agreement stands optional, it’s always preferable to have it written and notarized. As a partnership agreement is an important and primary document which allows smooth flow and brings out the agenda and motive of the business. Also, by having a legal partnership agreement the partner(s) rights and interests are protected. An agreement helps in resolving disputes that might arise in the future. Since, it’s a mutually agreed documents all the partner(s) views are duly noted before drafting such agreement.

If the partner(s) wants to make any changes the same shall be made with the consent of other members and notify the same to the ROC and could ratify the same.