84  Limited Liability Partnership: Structure and procedure of formation of LLP in India

84.1 Concept of LLP

A Limited Liability Partnership (LLP) is a hybrid business form combining the flexibility of a partnership with the limited liability of a company. In India, LLPs are governed by the Limited Liability Partnership Act, 2008 (assented 7 January 2009; in force 31 March 2009). The Act was introduced on the recommendation of the Naresh Chandra (2003) and J.J. Irani (2005) Committees. LLPs are administered by the Ministry of Corporate Affairs through the Registrar of LLPs, with PAN, TAN, GST and other registrations as needed.

84.2 Key Features

TipSalient Features of an LLP
  • Body corporate with separate legal entity (§ 3).
  • Perpetual succession.
  • Limited liability of partners — limited to their contribution.
  • Internal flexibility via LLP Agreement.
  • No minimum capital required.
  • Minimum 2 partners; no maximum.
  • At least 2 Designated Partners (DPs), of whom at least one must be resident in India (stayed ≥ 120 days in financial year).
  • Mutual rights and duties governed by LLP Agreement (Schedule I as default).
  • Audit not required if turnover < ₹40 lakh and contribution < ₹25 lakh.
  • Cheaper compliance than companies.

84.3 LLP vs Partnership vs Company

TipLLP vs Partnership vs Private Company
Aspect Partnership (1932) LLP (2008) Private Company (2013)
Legal entity No separate entity Separate entity Separate entity
Liability Unlimited Limited Limited
Max members 50 No limit 200
Min members 2 2 2
Registration Optional Mandatory Mandatory
Perpetual succession No Yes Yes
Min capital None None None
Audit If specified If TO ≥ ₹40 L Mandatory
Compliance Low Medium High
Governance Partnership deed LLP Agreement MoA + AoA

84.4 Formation of an LLP

84.4.1 Steps

TipLLP Incorporation — Steps
  1. DSC — Digital signatures of all DPs.
  2. DIN/DPIN — apply through SPICe / FiLLiP form.
  3. Name Reservation — RUN-LLP web service or Part-A of FiLLiP.
  4. FiLLiP (Form for Incorporation of LLP) — single integrated form (since 2018) — incorporates LLP and allots DPIN, PAN, TAN.
  5. Certificate of Incorporation issued by RoC.
  6. File LLP Agreement in Form 3 within 30 days of incorporation.

84.4.2 Documents required

PAN/Aadhaar/Passport of DPs; address proof; registered office proof; consent of DPs; LLP agreement; subscriber’s statement.

84.4.3 LLP Agreement (Schedule I — Default Rules)

If no agreement: equal share in profits and losses; equal management rights; majority decision (except change of business → unanimous); books of account at registered office; etc.

84.5 Partners and Designated Partners

TipCategories of Partners
  • Partner (§ 5) — must be individual or body corporate; minor cannot be partner.
  • Designated Partner (§ 7) — at least 2; at least 1 resident Indian.
  • DP responsibilities: compliance, statutory filings, penalties.
  • Disqualifications (§ 5(b)) — unsound mind, undischarged insolvent, applied for insolvency.

84.5.1 Cessation of Partnership

By: agreement; notice of not less than 30 days to other partners; death; dissolution; insolvency; insanity; etc. (§ 24).

84.6 Conversion

TipConversion to LLP
  • Firm into LLP — Schedule II.
  • Private company into LLP — Schedule III.
  • Unlisted public company into LLP — Schedule IV.
  • LLP into Private/Public Company — under MCA Rules (Companies Authorised to Register Rules 2014).

84.7 Compliance and Filing

TipAnnual Compliance
  • Form 8 — Statement of Account & Solvency (annually).
  • Form 11 — Annual Return.
  • Audit — required if turnover ≥ ₹40 lakh or contribution ≥ ₹25 lakh.
  • Income-tax return — applicable.
  • GST registration — as per turnover.
  • KYC of partners — DPIN-3 KYC.
  • Strike-off — Form 24 (cessation of business).

84.8 Winding-Up & Dissolution (§§ 63-65)

Two modes (mirroring company law):

TipLLP Winding-Up
  • Voluntary winding-up — by partners’ decision (now handled under IBC since 2017).
  • Compulsory winding-up by Tribunal (NCLT) on grounds: own resolution, no business for one year, less than 2 partners for six months, default in filings, against state interest, just & equitable.
  • Strike-off — Form 24.
  • IBC 2016 — applicable to LLPs since notification (1 April 2017).

84.9 Tax Treatment

LLP is taxed as a partnership firm under Income-tax Act — flat 30 % + surcharge + cess; no Dividend Distribution Tax in legacy regime; remuneration & interest to partners deductible (within § 40(b) limits).

flowchart TB
  L[LLP 2008] --> F[Formation<br/>FiLLiP · DSC · DIN · Cert · Form 3]
  L --> P[Partners<br/>≥2 · DP ≥2 · 1 resident]
  L --> Co[Compliance<br/>Form 8 · Form 11 · Audit if TO ≥₹40L]
  L --> C[Conversion<br/>Sch II/III/IV]
  L --> W[Winding Up<br/>NCLT · IBC 2016 · Form 24]
    classDef default fill:#003366,color:#ffffff,stroke:#ffcc00,stroke-width:3px,rx:10px,ry:10px;

NoteDistractor warning

PYQ trap: LLP Act 2008 (effective 31 March 2009); min 2 partners, min 2 DPs, ≥1 resident; FiLLiP is integrated form; Form 8 = Solvency, Form 11 = Annual Return. Audit if TO ≥ ₹40 L or contribution ≥ ₹25 L.

84.10 Practice Questions

Q 01ActEasy

LLPs in India are governed by:

  • ALLP Act 2008
  • BCompanies Act 2013
  • CPartnership Act 1932
  • DIndian Contract Act 1872
View solution
Correct Option: A
**LLP Act 2008**.
Q 02DPEasy

Minimum Designated Partners required:

  • A1
  • B2
  • C3
  • D5
View solution
Correct Option: B
**2 DPs**; one must be resident in India.
Q 03ResidentMedium

Resident DP must have stayed in India in the FY for at least (post 2021 amendment):

  • A60 days
  • B120 days
  • C182 days
  • D365 days
View solution
Correct Option: B
**120 days** (LLP Amendment Act 2021); earlier 182 days.
Q 04Max partnersEasy

Maximum number of partners in an LLP:

  • A50
  • B100
  • C200
  • DNo upper limit
View solution
Correct Option: D
**No upper limit**.
Q 05FiLLiPMedium

Integrated LLP-incorporation form is:

  • ASPICe+
  • BFiLLiP
  • CINC-7
  • DRUN
View solution
Correct Option: B
**FiLLiP** — Form for Incorporation of LLP (since 2018).
Q 06AuditMedium

LLP audit is mandatory if turnover exceeds:

  • A₹10 lakh
  • B₹25 lakh
  • C₹40 lakh
  • D₹1 crore
View solution
Correct Option: C
**₹40 lakh turnover** OR contribution ≥ ₹25 lakh.
Q 07Form 8Medium

Statement of Account & Solvency is filed in:

  • AForm 3
  • BForm 8
  • CForm 11
  • DForm 24
View solution
Correct Option: B
**Form 8 — solvency**; Form 11 — annual return.
Q 08Form 11Medium

LLP Annual Return is filed in:

  • AForm 3
  • BForm 8
  • CForm 11
  • DForm 24
View solution
Correct Option: C
**Form 11**.
Q 09ConversionHard

Conversion of partnership firm into LLP is governed by:

  • ASchedule I
  • BSchedule II
  • CSchedule III
  • DSchedule IV
View solution
Correct Option: B
**Schedule II** (firm → LLP).
Q 10LiabilityEasy

Liability of LLP partners is:

  • AUnlimited
  • BLimited to contribution
  • CPersonal
  • DJoint & several without limit
View solution
Correct Option: B
**Limited to contribution**.
Q 11EffectiveHard

LLP Act 2008 came into force on:

  • A7 Jan 2009
  • B31 March 2009
  • C1 April 2009
  • D1 April 2010
View solution
Correct Option: B
**31 March 2009**.
Q 12NareshHard

Committees recommending introduction of LLP:

  • ABhabatosh Datta / Sukhamoy
  • BNaresh Chandra (2003) & J.J. Irani (2005)
  • CKumar Mangalam Birla
  • DTarapore
View solution
Correct Option: B
**Naresh Chandra & Irani Committees**.
Q 13Min capitalMedium

Minimum capital required to start an LLP:

  • A₹1 lakh
  • B₹5 lakh
  • C₹10 lakh
  • DNone
View solution
Correct Option: D
**No minimum** capital.
Q 14MinorHard

A minor in LLP:

  • ACan be a partner
  • BCannot be a partner
  • CCan be admitted to benefits only
  • DAlways a DP
View solution
Correct Option: B
A minor **cannot be a partner** in an LLP.
Q 15Form 24Hard

For strike-off (cessation), LLP files:

  • AForm 3
  • BForm 24
  • CForm 8
  • DForm 11
View solution
Correct Option: B
**Form 24** — strike-off.
Q 16TaxMedium

Income tax rate for LLP:

  • A22 %
  • B25 %
  • C30 % flat
  • D35 %
View solution
Correct Option: C
**30 % flat** + surcharge + cess.
Q 17DPINMedium

DPIN is allotted to:

  • AAll partners
  • BOnly Designated Partners
  • CAuditor
  • DLLP itself
View solution
Correct Option: B
**DPs** — Designated Partner Identification Number.
Q 18AgreementMedium

LLP Agreement is filed in:

  • AForm 3 (within 30 days)
  • BForm 8
  • CForm 11
  • DForm 24
View solution
Correct Option: A
**Form 3** within 30 days of incorporation.
Q 19IBCHard

IBC was made applicable to LLPs from:

  • A2009
  • B2016
  • C2017
  • D2021
View solution
Correct Option: C
**LLPs covered under IBC from 1 April 2017**.
Q 20MatchMedium

Match form with purpose:

Form Purpose
(i) Form 3 (a) Annual return
(ii) Form 8 (b) LLP Agreement
(iii) Form 11 (c) Strike-off
(iv) Form 24 (d) Solvency
  • A(i)-(b), (ii)-(d), (iii)-(a), (iv)-(c)
  • B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
  • C(i)-(c), (ii)-(d), (iii)-(b), (iv)-(a)
  • D(i)-(d), (ii)-(c), (iii)-(b), (iv)-(a)
View solution
Correct Option: A
3-Agreement, 8-Solvency, 11-Annual return, 24-Strike-off.

84.11 Quick Recall

ImportantQuick recall
  • LLP Act 2008 — assent 7 Jan 2009; effective 31 March 2009; on Naresh Chandra 2003 & Irani 2005 Committees.
  • Hybrid form: limited liability + partnership flexibility.
  • Min 2 partners; no max; min 2 DPs; 1 resident DP (120 days).
  • No min capital.
  • Forms: FiLLiP (incorporation), Form 3 (agreement, 30 days), Form 8 (solvency), Form 11 (annual return), Form 24 (strike-off).
  • Audit: TO ≥ ₹40 L or contribution ≥ ₹25 L.
  • Tax: flat 30 % + surcharge & cess; no DDT.
  • Conversion: Sch II (firm), Sch III (pvt co), Sch IV (unlisted public co).
  • Winding-up: NCLT compulsory; IBC since 1 Apr 2017.