A limited liability company is a legal entity having certain characteristics of both a corporation and a partnership or sole proprietorship. It is a United States’ specific form of private limited company and has been in practice around the world since many years. It was after promulgation of The Limited Liability Partnership Act (‘Act’) in 2017 that the business structure of Limited Liability Partnership (‘LLP’) was introduced in Pakistan and the incorporation of LLP is defined in the Limited Liability Partnership Regulations, 2018. Prior to this Act, there were two types of partnerships in Pakistan being unregistered partnerships and partnership registered with the Registrar of Firms. Both these types of partnerships were unregulated and resulted into several disputes. Moreover, another drawback of any partnership is that the partners’ liabilities are unlimited.
On the other hand, as the name suggests the essential characteristic of LLP is that the partners are legally responsible for its debts only to the extent of the amount of capital they invested. The partners will be severally liable. Furthermore, it is required to be incorporated with the Securities and Exchange Commission of Pakistan (SECP) which provides transparency and regulations.
The LLP is incorporated through online service of SECP with a hassle-free procedure. The incorporation procedure starts with reserving a name for the LLP. The applicant is required to submit an online ‘name reservation form’ with a prescribed fee of Rs. 100 wherein three chosen names are mentioned and upon satisfaction of the Registrar, SECP an available name is reserved for 30 days and the applicant is allowed to submit an online ‘incorporation form’ along with a fee of Rs. 1000.
The essential requirements for incorporation form of LLP are the copies of the National Identity Cards of all partners and a signed Limited Liability Partnership Deed/Agreement. The said Deed/Agreement is required to be printed on a stamp paper of a value of Rs. 2,000 only. The incorporation process is simple and less time consuming. The average time after successfully filing the incorporation application may vary from 5 to 15 working days. Once all requirements are fulfilled a Certificate of Incorporation will be issued to SECP.
Other additional essential points to know about LLP is that LLP is not required to submit any annual return to the Registrar, SECP and LLP is required to have an ‘Auditor’ appointed and have a ‘Designated Partner’ for its operations.
LLP is a new air in the business world of Pakistan which provides a beautiful blend of partnership and private limited company. It serves security to smaller businesses (minimum two person can incorporate a LLP), provide regulations and encourage new startups due to less requirements for its incorporation with the SECP.
