2. INTRODUCTION
IDEA EMERGED OUT OF THE REPORT OF THE NARESH
CHANDRA COMMITTEE AND DR. J.J. IRANI COMMITTEE,
INTRODUCED IN ORDER TO ADOPT A CORPORATE
FORM
LLP IS A BODY CORPORATE & IS A SEPARATE LEGAL
ENTITY.
IN AN LLP, ONE PARTNER IS NOT RESPONSIBLE OR
LIABLE FOR ANOTHER PARTNER'S MISCONDUCT OR
NEGLIGENCE
FROM MARCH 31, 2009, THE LIMITED LIABILITY
PARTNERSHIP ACT, 2008 CAME INTO FORCE TO
BASICALLY VISUALISE & GIVE OPPORTUNITIES MAINLY
TO SERVICE SECTOR INCLUDING I.T, ACCOUNTANCY &
LAW
3. RATIONALE OF LLP
FILL THE GAP BETWEEN BUSINESS FIRMS.
FOSTER THE GROWTH OF THE SERVICES SECTOR.
VIEWED AS A PATH-BREAKING REFORM INITIATIVE
PROVIDES AN EFFECTIVE ALTERNATE CORPORATE
BUSINESS VEHICLE.
4. FEATURES OF LLP
LIMITED LIABILITY & PERPETUAL SUCCESSION
HEALTHY BLENDING OF PARTNERSHIP & COMPANY
BODY CORPORATE HAVING LEGAL ENTITY SEPARATE FROM
ITS PARTNERS
MINIMUM NUMBER OF PARTNERS IS TWO & THERE IS NO
LIMIT ON MAXIMUM NUMBER OF PARTNERS
WRITTEN PARTNERSHIP DEED & REGISTRATION IS
COMPULSORY WITH REGISTRAR OF COMPANIES [ROC]
ANY INDIVIDUAL OR BODY CORPORATE CAN BE A PARTNER
IN AN LLP
5. FEATURES OF LLP
A PARTNER IN AN LLP CAN BIND THE LLP BUT NOT THE CO-
PARTNERS.
THERE IS NO PRINCIPAL – AGENCY RELATIONSHIP
EVERY LLP SHOULD HAVE AT LEAST 2 DESIGNATED
PARTNERS, WHO ARE INDIVIDUALS & AT LEAST ONE OF
THEM SHOULD BE RESIDENT IN INDIA.
INTEREST OF MINORITY PARTNERS ARE PROTECTED.
ACCOUNTS ARE TO BE MAINTAINED BUT SMALL
LLPS ARE EXEMPT FROM AUDIT PROVISIONS.
CHANGE IN PARTNERS IS REQUIRED TO REPORTED WITHIN
30 DAYS OF SUCH CHANGE.
6. FEATURES OF LLP
CONCEPT OF “HOLDING OUT” BY PARTNERS INCORPORATED.
LLPS ARE NOT TAXED WITH DIVIDEND DISTRIBUTION TAX [DDT]
& MINIMUM ALTERNATE TAX [MAT]
BUT FOR OTHER PURPOSES LIKE REGISTRATION,
RECONSTRUCTION, AMALGAMATION, LIQUIDATION ETC ARE
SIMILAR TO THOSE UNDER COMPANIES ACT, 1956
FOR INCOME TAX PURPOSES, LLPS ARE TAXED AS GENERAL
PARTNERSHIP IS TAXED I.E. AT THE RATE OF 30% ON INCOME
PLUS 3% EDUCATION CESS.
ALREADY EXISTING PARTNERSHIP FIRMS, PRIVATE COS’ &
UNLISTED PUBLIC COMPANIES CAN CONVERT THEMSELVES INTO
LLPS.
NO PRINCIPAL - AGENCY RELATIONSHIP.
7. INCORPORATION OF LLP
2 or more persons are required to file incorporating document with the
concerned ROC. (Form 2)
ROC to register and give Incorporation Certificate within 14 days of
completion of all formalities.
It would be possible for any LLP to change its object, name or registered
office, admit new partners by executing a supplemental deed and to file
prescribed particulars with ROC.
Procedure for obtaining name of LLP is similar to that of a company.
Approve the name.
Must not be similar to any existing LLP.
Must end with words “LLP” (full/abbreviated, any)
Apply to ROC for reservation of name.
8. Any Individual/Body Corporate may be a partner.
Minimum 2 partners and no limit on maximum partners.
If the number of partners falls below 2, the surviving
partner will have to admit at least 1 more partner within 6
months.
If he does not do so, his liability in LLP will become
unlimited and the LLP will get wound up by theTribunal.
PARTNERS & DESIGNATED PARTNERS
PARTNER
9. Every limited liability partnership shall have at least two
designated partners (both individuals, atleast 1 Indian Resident)
To obtain DP Identification Number from Central Government.
Responsible for all compliances as required under the Act and is
also liable for penalty for contravention.
DESIGNATED PARTNERS (DP)
10. BENEFITS OF LLP
CONTRIBUTION
No minimum contribution is required from the partners. They can
contribute as per the LLP agreement.
STAMP DUTY
There is no provision in the LLPAct and Rules for the stamp duty to be
paid at the time of incorporation or conversion of other entities into
LLP.
OWNERSHIP
The property of the LLP lies in the name of LLP and the partners have
no right on the property of the LLP and they cannot make any claim
over the property.
MINIMUM ALTERNATETAX
The LLP need not to pay the Minimum AlternateTax.
11. BENEFITS OF LLP
AGGREMANT
LLP is organized and operates on the basis of LLP agreement, which itself is not
mandatory.
WINDING UP
The LLP Act also contains the provisions of Winding up and dissolution
DRAWINGS
Drawings are permitted in the LLP.
HYBRID FEATURE
The LLP has the characteristics of both the company and firm i.e. a firm with
limited liability.
12. CONCLUSION
Flexible and hybrid structure of LLP will facilitate entrepreneurs, service providers, small and medium
enterprises, venture capitalists and professionals to organize and operate in an innovative and
efficient manner for effectively competing in the global market.
THE INTRODUCTION OF LLPs IN INDIA ISA GOOD BEGINNINGTOWARDSA LONG JOURNEY.