Transcript of Prepared By : A.RAMA GOPAL KRISHNA CA-FINAL The Limited Liability Partnership was formed in the...
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- Prepared By : A.RAMA GOPAL KRISHNA CA-FINAL
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- The Limited Liability Partnership was formed in the early 1990
s in United States in the consequence of the collapse of real
estate and energy prices in Texas in the 1980s. This collapse led
to a large wave of bank and savings and loan failures. Because the
amounts recoverable from the banks were small, efforts were made to
recover assets from the lawyers and accountants who had advised the
banks in the early 1980s. The reason was that partners in law and
accounting firms were subject to the possibility of huge claims
which would bankrupt them personally, and the first LLP laws were
passed to shield innocent members of these partnerships from
liability. Apart from India Many Countries like Canada, China
Germany, Greece, Japan, Kazakhstan, Poland, Romania, and Singapore
have felt the need to recognize LLPs in their country.
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- IIn India, The Limited Liability Partnership Act, 2008 was
published in the official Gazette of India on January 9, 2009 and
has been notified with effect from 31 March 2009. The first LLP was
incorporated in the first week of April 2009. Some sections
relating to conversion of existing partnership firms and private as
well as public unlisted companies into LLP have been brought into
force on 31-5-2009. TThe legal consultants Handoo and Handoo have
become the first Limited Liability Partnership firm of India.
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- LLP is a separate legal entity separate from its partners, can
own assets in its name, sue and be sued. Unlike corporate
shareholders, the partners have the right to manage the business
directly. In an LLP, One partner is not responsible or Liable for
partners misconduct or negligence. Minimum of 2 partners and no
maximum. Should be for profit business.
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- The rights and duties of partners in LLP, will be governed by
the agreement between partners and the partners have the
flexibility to devise the agreement as per their choice. The duties
and obligations of Designated Partners shall be as provided in the
law. Liability of the partners is limited to the extent of his
contribution in the LLP. No exposure of personal assets of the
partner, except in cases of fraud.
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- LLP shall maintain annual accounts. However, audit of the
accounts is required only if the contribution exceeds Rs. 25 lakhs
or annual turnover exceeds Rs.40 lakhs. Perpetual succession.
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- Partner in LLP is not liable for the wrongful acts of other
partners. LLP will have a perpetual succession. Admission or
Cessation of a Partner shall not affect its status. A Firm, Private
Company or a Public Company can be converted in LLP. Partner may
transact with LLP. Professionals like CA, CS etc. can form LLP.
ADVANTAGES OF LLP
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- No limitation on maximum number of Partners in LLP. Even a body
corporate can be a Partner. Audit not mandatory for certain LLPs.
Rights of Partners can be transferred, either wholly or in
part.
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- Business with profit motive for LLP (Nothing like Section 25
Company). Unlimited liability of partners and LLP in case of Fraud.
Mandatory filing with ROC. LLP can not maintain financial secrecy.
FDI issue yet not notified. Accounting Standard yet not
notified
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- Though LLP is a combination of both Partnership and Company, it
differs from them in certain aspects as discussed below: Sl.
NoConditionLLPCompanyPartnership 1RegistrationTo be registered With
Registrar of LLP under LLP Act To be registered with under
companies Act, 1956 Registration is optional 2NameName should
contain Limited Liability Partnership or LLP as last word. Name
should contain Limited or Private Limited as last word. Any name as
per choice. 3Legal EntityLLP is a separate legal entity registered
under LLP Act Company is a separate legal entity registered under
Companies Act, 1956 Not a separate legal entity
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- Sl. No ConditionLLPCompanyPartnership 4Formation Cost The cost
of Formation is lesser that of formation of Company. The cost of`
Formation is higher than that of formation of LLP The Cost of
Formation is negligible 5Formation by Foreign Nationals alone can
not form a LLP Foreign Nationals alone can form a Company. Foreign
Nationals can not form Partnership Firm in India 6Minimum Number of
Members Minimum 2 partnersMinimum 2 in case of Private Company 7 in
case of Public Company. 2 7Management Team Minimum 2 Designated
Partners Minimum 2 / 3 Directors No requirements
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- Sl. NoConditionLLPCompanyPartnership 8Administrati on.
Designated Partners are responsible for day to day operations and
statutory Compliances Directors are responsible for day to day
operations and statutory Compliances Partners are responsible for
day to day operations and statutory Compliances 9Remuneratio n to
Managerial Personnel Remuneration to partners will be determined on
LLP Agreement Remuneration to Directors of Public Companies are
governed by Companies Act The firm can pay remuneration to its
partners 10Tax LiabilityIncome of LLP is Taxed at a Flat rate of
**30% Plus surcharge as Applicable. ** Finance Act, 2013 Income of
Company is Taxed at a Flat rate of 30% Plus surcharge as applicable
Income of Partnership is Taxed at a Flat rate of 30% Plus surcharge
as applicable
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- Sl. NoConditionLLPCompanyPartnership 11 Transfer of ownership
Rights Ownership transfer is governed by the LLP Agreement.
Ownership is easily transferable by transfer of shares Not
Transferable. 12 Annual Filing(RoC) Annual Statement of accounts
and Solvency & Annual Return needs to be filed every year
Annual Accounts and Annual Return needs to be filed with the
Registrar of Companies No return except Tax returns 13
DissolutionVoluntary or by order of National Company Law Tribunal
Voluntary or by order of Company Law Board. By agreement, mutual
consent, insolvency, certain contingencies, and by court Order 14
LiabilityLimited Unlimited 15 Corporate Restructuring
(Merger/Amalgam ation) Available Not Available
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- Step-1:-Deciding the Partners and Designated
PartnersStep-2:-Obtaining DPIN No. & Digital
SignatureStep-3:-Checking the Name AvailabilityStep-4:-Drafting of
LLP AgreementStep-5: Filing of Incorporation DocumentsStep-6:
Certificate of Incorporation `
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- A LLP can be incorporated with a minimum of at least two
partners who can be Individuals or Body Corporate through their
nominees. Further for incorporating an LLP, of the total number no.
of partners, at least two shall be Designated Partners, of which at
least one must be an Indian Resident. Parameters for deciding the
Partners and Designated Partners: At least Two Partners;
Individuals or Body Corporate through individual nominees. Minimum
of Two Individuals as Designated Partners, of total no. of
Partners. At least One Designated Partner to be Resident Indian. A
person Resident in India means a person who has stayed in India for
a period of not less than one hundred and eighty two days during
the immediately preceding one year. (Explanation to Section-7)
Designated Partner means a partner who is designated as such in the
incorporation documents or who become a designated partner by and
in accordance with the Limited Liability Partnership Agreement
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- Director Identification Number (DIN): Every Designated Partner
is required to obtain a DIN from the Central Government. If a
person already has a DIN, the same can be used for forming LLP. If
DIN/DPIN for partners not available then: For Filing DIN (Directors
Identification Number/Limited Liability Partners Identification
Number) Form
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- Partners Name (with expansion of initials), Fathers Name, Grand
Fathers Name, Date of Birth, Place of Birth, Address, Occupation,
Educational qualification, IT Permanent Account No or Passport No
or Voter Identity No., Phone No. and email address. PAN Card Copy.
Proof of identity Copies of any one -PAN Card, Passport, Voters
Identity card Address Proof - Copies of any one - Latest Bank pass
book or Statement, Ration Card (address should be in English),
Voters ID, Driving License. Passport size Photos of all Partners.
Affidavit in Rs.20 stamp paper for each partner and it should be
notarized. (It will be prepared by us after obtaining the above
details The DIN can be applied online at
(http://www.mca.gov.in/MCA21/Din.html).http://www.mca.gov.in/MCA21/Din.html
Digital Signature Certificate: All the forms like eForm 1, eForm 2,
eForm 3 etc. which are required for the purpose of incorporating
the LLP are filed electronically through the medium of Internet; it
is not possible to sign them manually. Therefore, for the purpose
of signing these forms, the Designated Partner of the proposed LLP
needs to obtain a Digital Signature Certificate (DSC) from
government recognized DSAs. The signatures shall also be required
for signing and filing of all relevant forms and documents to be
filed, annually or event based after incorporation of the LLP,
asking for approvals or as intimation.
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- Name of the Partner who is to obtain the DS Name, Fathers Name,
Date of Birth, Place of Birth, Address, Occupation, IT Permanent
Account No. or Passport No or Voter Identity No., Phone No. and
email address One Passport Size Photo Proof of Identity like PAN
card, Voters ID and Passport Proof of Address like Bank Statement,
Ration Card or Driving License The documents Proof of Identity and
Proof of Address should be attested by a Gazetted Officer
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- The next step is to decide the name for the proposed LLP to be
incorporated, anyone intending to incorporate an LLP has to
evaluate his proposed name under the rescribed parameters and make
an application in Form 1 of Rule 18(5) of the Limited Liability
Partnership Act 2008, for reservation of the desired name. The name
of the limited liability partnership shall not be similar or
identical with Company or LLP already registered in India and it
should not contains words prohibited under the Emblems and Names
(Prevention of improper use) Act, 1950or which are also not
Undesirable in the opinion of Central Government or which satisfies
the conditions prescribed under rule 18(2). For more information
check Name Availability Guidelines. In case any Body Corporate is
partner, copy of Board resolution authorizing the incorporation of
LLP shall be attached.
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- LLP Name (Preferred one and 2 more alternative names) with
explanation of the Name coined. Main Proposed activity of the LLP
Partners List DIN/DPIN of the Partners Digital Signature to be
obtained for one of the proposed Partner/Designated Partner Main
email ID
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- The next pertinent step is drafting of Limited Liability
Partnership Agreement governing the mutual rights and duties among
the partners and among the LLP and its partners. The basic contents
of Agreement are: Name of LLP Name of Partners & Designated
Partners Form of contribution Profit Sharing ratio Rights &
Duties of Partners Proposed Business Rules for governing the LLP In
case no agreement is entered into, the rights & duties as
prescribed under Schedule I to the LLP Act shall be applicable It
is not necessary to have the LLP Agreement signed at the time of
incorporation, as the details of the same needs to field in eform 3
within 30 days of incorporation but in order to avoid any dispute
between the partners as to the terms & conditions of the
agreement after the formation of LLP, it is always beneficial to
have the LLP Agreement drafted and executed before the
incorporation of the LLP. In case the Agreement is executed outside
India, than it must be notarized and consularized, for more
information check Incorporation of LLP under FAQs
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- Next is the filing of Incorporation documents, consent of
Partners and declaration electronically through the medium of
e-forms prescribed with the Registrar of LLP for incorporation of
the LLP on payment of prescribed fees based on the total monetary
value of contribution of partners in the proposed LLP. Eform 2:
Incorporation Document and subscriber's statement This is an
informative document setting down the details of LLP, its Partners
including designated partners along with their amount of
contribution and consent for forming a Limited Liability
Partnership to carry on a lawful business with profit motive along
with declaration stating that all the requirements of Limited
Liability Partnership Act, 2008 regarding incorporation of LLP in
India have been complied with. Subscription Sheet: The partners are
required to subscribe their names along with signatures to the
subscription sheet and also along with their consent to become a
partner/ designated partner/ nominee/ nominee & designated
partner of the LLP which shall be witnessed by any Chartered
Accountant/Company Secretary/Advocate in practice.
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- In case the subscription sheet is executed outside India, than
it must be notarized and consularized, for more information check
Incorporation of LLP under FAQs eForm 3: Details of LLP Agreement
eForm 3 This form provides for the necessary information in respect
to the LLP Agreement entered into between the partners. Only eForm
3 is required to file within 30 days of the incorporation. All the
eforms will be digitally signed by any designated partner and shall
be certified by an advocate/company secretary/chartered
accountant/cost accountant in practice engaged in the formation of
LLP. Key points: Filling will be done on
www.llp.gov.inwww.llp.gov.in with All the Designated Partners need
to be register as Business User. Digital Signature is required only
for the Designated Partner who would be signing all the e
Forms.
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- After the Registrar is satisfied that all the formalities with
respect to the incorporation has been complied, he will issue a
Certificate of Incorporation as to formation of the LLP within
maximum of 14 days from date of filing of documents. The
Certificate of Incorporation issued shall be the conclusive
evidence of formation of the LLP.
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- The precondition for conversion for your partnership firm is 1.
Partnership should be a registered under Indian partnership Act
1932 2. All the partners of existing firm should compulsorily
become the partners of LLP 3. Minimum 2 partners as Designated
Partners and one of them should be Resident in India. 4. Digital
Signature Certificate for one of the Designated Partners. 5. LLP
(Limited Liability Partnership) Name. 6. LLP (Limited Liability
Partnership) Agreement. 7. Registered Office for the existing
partnership firm
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- Obtain name approval for LLP (Limited Liability Partnership)
Application for conversion of firm to LLP in Form 17 File the
following forms along with a statement by all partners with
registration number and date of registration of the firm. Form 2 :
Details of partners, registered office etc Form 4 : Consent of
Partners Consent of each partner to become a partner of Liability
Partnership Form 3 : LLP agreement this can be filed with in 30
days from the date of registration After verification, registrar
will register all documents and issue Certificate of registration
5. Upon registration of LLP, file an intimation to the Registrar of
Firms stating the fact that firm is converted into LLP.
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