This aricle is written by YAKASIRI UMA MAHESWARI,Currently pursuing final year of B.A.LL.B, in SRI PADMAVATI MAHILA VISVAVIDYALAYAM, TIRUPATI.
Abstract
An LLP is an independent legal entity with unlimited capacity. This means that anything a natural person can do, an LLP can do. She holds her property and has the authority to enter into contracts on her behalf. Changes to a partnership do not affect its continued existence. An LLP is a separate legal entity from its partners. An LLP exists as a separate legal entity, making it a company rather than a partnership firm. The liability of the partners of the LLP is limited only to their own contributions, and the partners shall not be liable for the fraud, negligence, or participation in the wrongful acts of other partners. All assets and liabilities of the LLP are its property and no partner shall be permitted to claim exclusive rights over any property belonging to the LLP during the life of the LLP or upon dissolution/liquidation. Similarly, creditors cannot personally sue shareholders. In order to assess an LLP as an artificial person, you need to know that the law believes that organizations such as corporations should be granted certain rights and obligations that are generally accorded to human beings. If established, it is referred to as an artificial person that exists independently of the shareholders and is treated as an independent person. LLPs are considered artificial legal entities because they are created through a legal process and have all the rights of a natural person. Although LLP is invisible, intangible, and immortal, it is not invented because it actually exists.
Key Words: Limited Liability Partnership, Wrongful Acts, Artificial legal entities, Shareholders, Independent persons, invisible, intangible and immoral.
Introduction
Until twenty years ago, business activities were limited to a company, a general meeting or a private company. Each type of organization has its strengths and weaknesses. For example, it was easy to create and practice partnership and ownership relationships, but lacked the limited liability characteristic of entrepreneurship. The development of commercial activities led to the establishment of limited companies (LLP). It can be described as a combination of the advantages of a corporation and a partnership. Learn about trusts, their benefits, and the process of creating lifelong learning in this article.
Meaning and Characteristics of a Limited Liability Company (LLP)
LLP is a relatively new concept in the business world. Section 3 of the Limited Liability Companies Act 2008 defines an LLP as “a legal entity established and registered under that Act separate from its partners”. Simply put, it can be understood as a merger of companies. This business model allows organizations to enjoy the benefits of limited liability to their partners at a relatively low cost compared to traditional models. This form of organization is suitable for small and medium-sized companies.
Important Characteristics of Trusts
To understand the concept of Trust we must understand its characteristics listed below. Co., Ltd.
Section 3(1) of the Limited Partnerships Act 2008 provides that a lifelong learning program is controlled by a “corporation”. Simply put, it is a legally existing legal entity whose legal existence results from the registration of registered lifelong learning.
Separate legal entity
Section 3(1) of the Limited Partnership Act 2008 also states that a lifelong learning program is a separate legal entity. This term can be understood as “a person recognized by law”. The term “separate legal entity” was coined in the landmark case Salomon v Salomon and Co. Ltd. (1897), according to which it is a legal entity separate from the business organization, which has its own legal rights and obligations.
Perpetual Succession
Under section 3(2) of the Limited Liability Partnerships Act 2008, an “LLP” has a “perpetual succession” similar to a “joint stock company”. H. May be instituted and terminated only by judicial process. It also means that the LLP’s assets and liabilities are included in its lifetime scheme, regardless of retirement, insanity, bankruptcy or even the death of one or more partners. This means that in the event of survival or dissolution, the shareholders cannot claim any part of the company.
Mutual representation
Mutual representation can be described as a type of arrangement between business partners where the actions of one partner bind the actions of the other partner. Unlike traditional partnerships, lifelong learning programs do not have cross-presentation. This means that each partner acts only as an agent of his own lifelong learning program and the actions of one partner do not bind the other partner.
Fictitious company
Since the lifelong learning program is formed during a legal process, it is considered a non-fictitious legal entity with all the rights of a natural person. However, it is considered artificial because it has no physical existence, is invisible, intangible and immortal. Therefore, they cannot exercise rights such as marriage and divorce, take prison terms or take oaths.
Duties of partners in a trust
Section 2(g) of the Limited Liability Partnership Act 2008 provides that in an LLP, “partner” means a person who becomes a “life partner” under the LLP. To an agreement Since the partner acts as a mediator of his lifelong learning, he becomes one of the most important parts of the organization. Some of the important roles and responsibilities of partners are listed below.
You must exercise your limited liability to the Company in the following ways:
- Beneficial to both the Company and the Partner
- All Partners are loyal to each other
- To provide each Partner with true reports and full information about all things affecting the Company
- The Partner is responsible for fraud in the business of the Partner in case of compensation for damages.
Shareholder notification to the commercial register of the following circumstances: –
- Changes in the structure or operation of lifelong learning.
- Change of name and home address of partner.
- Change of the company’s registered address.
- Submit annual reports, account statements and other documents in accordance with the provisions of the Law on Lifelong Learning.
- Maintain and prepare documents related to the LLP program as required.
- Sign all electronic forms submitted. Documents such as account statements and solvency must be signed by a partner designated by the company.
- Law Applicable to Limited Partnerships in India
In India, the term “Limited Liability Partnership” (LLP) was first introduced in 2008 by the Limited Liability Partnership Act, 2008, which governs all life insurance schemes in the country. Because of that different status, contracts between LLP partners are governed by that Act and not by the Indian Partnership Act, 1932. It may also be noted that the Central Government is entitled to apply the provisions of the notification. Companies Act, 1956, with significant amendments for lifelong learning program.
Disadvantages of forming a limited liability partnership
Just as there are two sides to a coin, limited partnerships also have some drawbacks. Some of them are listed below.
Unequal rights of partners
- Unlike a corporation, where all shares have the same value, in an LLP not all partners have the same voting rights.
- This means that equal rights are not enforced. A partner’s rights are governed by his LLP agreement.
Severe penalties
At first glance, it may seem like an advantage that only minimal compliance requirements need to be met when forming an LLP. It is Important to note that irrespective of the business activities of an LLP, income tax returns and MCA annual returns must be filed annually. In case of default, a fine of 1 million rupees will be imposed. You will be charged $100 per day by your LLP, which can be higher than the fines paid for violations within your company.
Funding issues
Since LLPs consist only of partners, there is no concept of equity or shareholders and investors cannot finance the business. This means that the LLP’s business operations are dependent on financing from project sponsors and external capital.
- Just as there are two sides to a coin, limited partnerships also have some drawbacks. Some of them are listed below.
How to establish a limited liability partnership
To form a limited liability partnership, you must follow these steps:
- Step 1: Obtain a digital signature certificate (DSC)
The first step is to obtain the digital signatures of all specified partners. This is very important as all LLP documents must be submitted online and require digital signatures.
- Step 2: Apply for a Director Identification Number (DIN)
The next step is to apply for DINs for all designated partners or those who wish to become designated partners of the proposed LLP. Requests for DIN assignment must be submitted in Form DIR-3.
- Step 3: Approve the LLP name
To obtain a unique name, you must submit a form called Limited Liability Partnership Reserved Unique Name (LLP-RUN). You can suggest a total of two names in the form. You can use the free name search feature on the MCA portal to ensure uniqueness, as the name does not resemble any existing business organization or brand. The form is then further processed on a non-STP basis by the Central Registration Authority. Straight Through Process (STP) is the process used by India’s Ministry of Corporate Affairs (MCA) to approve submitted electronic forms. Fees are payable in accordance with Appendix A. If an error occurs, you have 15 days to resubmit the form.
- Step 4: Formation of LLP
The form used for incorporation is known as Limited Liability Partnership Formation Form (Filip). This particular file must be filed with the Registrar of the state where the LLP is registered and paid as per Schedule A. If the name of the LLP is not yet approved, the proposed name must be filled in.
- Step 5: File the LLP Agreement
The Limited Liability Partnership Act, 2008 prescribes the rights and obligations of the partners and between the partners and the LLP. The final step is to file the LLP Agreement which must be filed on the MCA portal using Form No. 3 Within 30 days from the date of establishment. Importantly, this is deposited in stamps, the value of which varies from state to state.
Structure of limited liability partnership
To form a limited partnership, he must have at least two people, but there is no limit to the maximum number of people. The following “people” can be involved as partners.
- Individual
- Limited Liability Partnership
- Company
- Foreign limited liability partnership
- Foreign Company
Apart from the above conditions, it is mandatory that one of the partner’s girlfriends is a resident of India.
Structure of limited liability partnership
The LLP Act provides that an LLP is a “legal entity” and is separate from its partners. It is also assumed that the organization will be inherited permanently. The concept of perpetual succession is defined by Merriam-Webster as “the ability to continue to use a corporation’s assets for as long as it legally exists.”
- The only factors that disqualify you from becoming a partner in an LLP are:
- If a court of competent jurisdiction finds that a person is mentally ill and the same still applies.
- If you are not bankrupt. or
- If you have filed for bankruptcy and the petition is still pending. Establishment of limited liability partnership
- To form an LLP, it is mandatory to register a branch under the Limited Liability Partnerships Act 2008.
To register an LLP, you need to follow these steps:
- Section 11 provides that an LLP is established by filing incorporation documents with the Registrar of the State in which the LLP wishes to establish its registered office. Such a constituent document must be signed by at least two persons relevant for the purpose of conducting a legitimate business for the purpose of making a profit.
- A declaration stating that all provisions of the law have been complied with must be submitted with the incorporation documents. Such a statement may be made by the accountant or cost auditor, the company secretary or lawyer involved in the formation of the LLP, and any person who signed the formation documents.
- If the person making the statement knows that the statement is false or is not sure of its truth, he or she may be sentenced to imprisonment for up to two years and a fine of up to Rs 500,000.
- The formation documents must state the LLP’s name and registered office, the names and addresses of all partners, including the designated partner, and the LLP’s proposed business. Once the conditions specified in Article 11 are met within the prescribed period, the Registrar shall register the incorporation documents and issue a certificate of incorporation to the LLP.
Conclusion
Since the scope of the LLP Act is not limited to professional firms only, the Act can be considered to give priority to the Iranian Committee’s proposals over the Naresh Chandra Committee.
The 2021 amendments adapt the law to the current economic situation. With the government’s economic policy to promote and encourage small and medium-sized enterprises and start-ups.
The Supreme Court needs to quickly clarifies its legal position on whether a lifelong learning program can form a partnership.
References:
- Blog ipleaders
- www.legalservices.com
- www.edu.com
- www.byjus.com
