Some or all partners in a limited liability partnership (LLP) have limited responsibility. It blends components of corporations as well as partnerships. A major distinction from traditional partnerships under the old Partnership Act 1890, when partners bore joint liability, in an LLP, one partner is not responsible for another partner’s errors or negligence. Partners in limited liability firms essentially have limited liability, somewhat like that of corporate stockholders.

Unlike stockholders in a corporation, LLP partners can directly operate the company. Under the Companies Act, 2017, shareholders in businesses must choose a board of directors. Unlike corporations, LLPs also have distinct tax obligations.

Introduced by the Securities & Exchange Commission of Pakistan (SECP), Limited Liability Partnerships are a new kind of corporate entity in Pakistan. The goal was to strike a middle course between modest unregistered businesses like sole proprietorships or partnerships and bigger limited corporations governed by the Companies Ordinance, 1984 or the Companies Act, 2017.

Why Choose an LLP in Pakistan?

LLPs differ from limited partnerships in many countries. In some countries, all LLP partners can have limited liability, whereas limited partnerships may require at least one partner to have unlimited liability, with others acting as passive investors. This makes LLPs ideal for businesses where all partners want an active role in management.

Under Pakistani corporate legislation, SARDAR KHAN & CO supports customers in establishing companies customised to their needs. Experienced attorneys specialize in establishing businesses, partnerships, and limited liability partnerships. Following the Limited Liability Partnership Act, 2017 and LLP Rules, 2018, we walk clients through every step of LLP formation, registration, incorporation, litigation, or dissolution.

We process LLP Deeds, which are notarised, signed by all partners plus two witnesses and sent to SECP along with NIC copies of all partners’ passports of foreign partners plus the indicated SECP charge. United Bank Limited (UBL) or Muslim Commercial Bank (MCB) provide payments.

Key Advantages of Forming an LLP

Choosing an LLP over traditional partnership firms has many advantages. Under the Limited Liability Partnership Act, 2017 and LLP Regulations, 2018, partners enjoy limited liability, previously only available to limited companies.

Unlike a traditional firm, which can have only up to 20 partners, an LLP has no such restriction.

LLPs are registered by SECP, making them a Body Corporate with a legal identity separate from their partners. This allows LLPs to own property in their name, whereas traditional firms cannot.

LLPs cannot be dissolved by partners because of their separate legal identity, unlike traditional firms, which can be dissolved at will. LLP registration is mandatory, while firm registration is optional.

LLPs are treated as Associations of Persons (AOP) under the Income Tax Ordinance, 2001.

Eligibility and Entry Requirements for LLP

Any two or more people intending to run a business for profit can create an LLP after registering with SECP under the Limited Liability Partnership Act, 2017, and LLP Rules, 2018.

Choosing a business name and submitting an application (Form I to Part I) to SECP for name registration starts the LLP creation process. This can be done online or physically. Names are checked against criteria in Section 6 of the Act. After approval, the LLP is registered within 2 days upon submission of all documents and fees.

Once the registrar is satisfied, the applicant submits Form I – Part II for incorporation within 30 days. Applying through Form III comes next, including all necessary documents and the set fee. Upon approval, the Registrar issues a Certificate of Incorporation.

If SECP refuses the application, the applicant may appeal to the Appellate Branch within 60 days.

Converting Existing Businesses into an LLP

The LLP Act 2017 allows existing firms or private limited companies to convert into an LLP. This is done using LLP-Form VI along with relevant documents and fees. Once SECP approves, a Certificate of Incorporation is issued, and the LLP is officially registered.

Dissolution of LLP

An LLP can be dissolved voluntarily or by court order.

If an LLP fails to comply with the Act, the Registrar can strike the name off the register. SECP must first notify the LLP and its partners, wait one month, and then issue a written order and publish a notice in the Gazette. Once this is done, the LLP is dissolved.

LLPs have a Designated Partner who manages administrative matters under Section 10 of the Act.

Physical documents can be destroyed with SECP approval:

• 10 years after filing, if the LLP exists
  
  
• 5 years after dissolution, unless needed for ongoing court proceedings
  
  

Security and Record-Keeping

Documents filed online with SECP are preserved permanently. Destroyed physical records are maintained electronically.

SECP amended LLP regulations in 2018 (SRO # 126(1)/2018) requiring:

• Certificate of incorporation displayed at the registered office
  
  
• A register of partners with ownership and voting rights
  
  
• A copy of the LLP agreement and amendments, kept at the registered office
  
  

Financial books must follow double-entry, accrual accounting. Financial statements must be prepared within 4 months of the year-end and filed with SECP. Resolutions to approve statements require the majority of partners or all partners if no designated partner exists.

Appointment of Auditor

With partner approval, an auditor is appointed through a resolution.

LLP books must be maintained in proper order for at least 10 years.