Post on 18-Nov-2014
Limited Liability Partnership
ACT 2008
By AKHIL KHANNAB.COM(H)UNIVERSITY OF DELHI
International Experience
• FRANCE :- LLP brought under Regulation first in 1673
• UNITED STATES, - first introduced in New York in1822• Non Compliance of laws resulted in liability of partners becoming
unlimited.o Uniform Limited Partnership law was enacted for protectiono Hewlett- Packard are LLPs in operation
• UNITED KINGDOM: - LLP act passed in 1867. o Came into force in 1907o Not being popular in UK, was replaced by LLP Act, 2000o Act designated the constituents of LLP as members and designated
members as agents of LLP
LLP background in India
• The Abid Hussain Committee recommended legislation on LLP in 1997.
• Naresh Chandra Committee Report II(2003) revived the idea of LLP by less regulatory impact of Companies Act.
• The J.J. Irani Committee(2005) recommended adoption of LLP as a new form of business.
• LLP Bill, 2006 was introduced in Rajya Sabha on 15th December,06.
• Later referred to Department Related Parliamentary Standing Committee on Finance.
What is LLP?
Limited Liability Partnership is a• Partnership formed and registered under this Act• Legal entity separate from its partners
o with perpetual succession ando with limited liability of its partners
• Body Corporate with capacity to o acquire, hold & dispose property in its own nameo Sue and be sued independent of its partners
Why LLP Act Passed?
• Potential for growth of the services sector
• Dominant role played by the professionals in the country’s economy
Incorporation of LLP
• Two or more persons carrying a lawful business shall subscribe to an incorporation document.
• Name to have ‘Limited Liability Partnership’ or ‘LLP’ as the last words.
• Reservation of name in Form 1 – for 3 months• Name not to be identical or too nearly resembles
any other o Partnership Firm, o LLP, o Body Corporate o a registered trade mark – if resembles CG may direct to change the name – 3
months to change (Section 17)
Partner in LLP• Any Individual who is
oof sound mindoSolvent or
• Body Corporate can become a partner of LLP.
Body Corporate
Body Corporate includes• Company incorporated in & Outside India • LLP incorporated in India & outside India• Registered Cooperative Society
But does not include• Corporation Sole• Cooperative Society• Partnership firm or HUF
Conversion into LLP• Application for Conversion
o Form 17 – From Partnership firm to LLP (Schedule II)o Form 18 – From Private company to LLP (Schedule III)o Form 18 – From unlisted public company to LLP (Schedule
III)• Incorporation documents also to be submitted • All partners required to apply for conversion• Registrar to give Certificate in Form 19• If rejected, appeal can be filed with NCLT• Intimation of conversion to be intimated to ROC in 14 days
in Form 14• Penalty for Non- Compliance
o Min. 10,000 o Max. 1,00,000
Tax Treatment Benefits of Conversion of Private Limited Company into
LLP• Taxation LLPs are taxed like general partnership firms.
LLPs pay an effective tax of 30.9%. • They are exempted from 10% surcharge. LLPs tax
payment is lower than that of companies/firm, which pay a 33.99% tax on profits.
• The tax will be imposed only on 40% of the LLP.s income, since the firm will be allowed to pay the balance 60% to the partners as remuneration. This means, the partners will have to pay tax on the amount paid to them.
No Audit requirement Audit is not required unless capital exceeding Rs. 25 lakh or turnover exceeding Rs. 40 lakh.
Unlike Companies, no requirement for payment of Corporation Tax on distribution of income among partners and shareholders.
there is no requirement as to Minimum Alternate Tax.
Automatic transfer ,All the assets and liabilities of the Company immediately before the conversion become the assets and liabilities of the LLP.
No Stamp Duty -All movable and immovable properties of the company automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
No Capital Gains tax shall be charged on transfer of property from Company to LLP.
The accumulated loss and unabsorbed depreciation of Company is deemed to be loss/ depreciation of the successor LLP for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor LLP.
No Limit on number of shareholders/partners Unlike private limited companies (shareholders limited to 50), an LLP can have unlimited number of partners.
Minimal Compliance Level & Cost effective model There is no need of compliances related to meetings and maintenance of huge statutory records.
Partnership vs. LLP
Partnership LLP
Legal Entity Not Separate Separate
Perpetual succession
No Yes
No. of members
Min. 2 Max. 20 Min2 , Max NA
Governing law
Indian Partnership Act
LLP Act….
Partnership vs. LLP
Partnership LLP
Partner’s Identity
No legal requirement
DP to obtain DPIN
Liability Unlimited Limited to contribution
Names No regulation Regulated
Audit Only if turnover exceeds 40L – 44AB
Only if turnover exceeds 40L or contribution 25 L
Company vs. LLP
Company LLP
Legal Entity Separate Separate
Perpetual succession
Yes Yes
Capital Requirement
1 Lakh for Pvt. & 5 Lakh for Public Ltd. Cos.
Contribution as per LLPA
No. of members
Pvt-Min2 Max 50Pub-Min3 Max NA
Min2 , Max NA
Company vs. LLP
Company LLP
Names Regulation Regulated - other partnership names cannot be kept
Flexibility of business
Regulated by MOA & AOA
Regulated by LLPA
Company vs. LLP
Company LLP
Most preferred by
Large businessesProfessionals
Listing Possible Not possible
Audit Compulsory Only if turnover exceeds 40L or contribution 25 L
Shareholders No consent required
Partners consent required
Meetings Regulated by Companies Act
Not mandatory
Company vs. LLP
Company LLP
Suffix 'Limited' or 'Private Limited'
'Limited Liability Partnership' or 'LLP'
Common Seal Compulsory Optional
Flexibility of business
Regulated by MOA & AOA
Regulated by LLPA