What is Limited Liability Partnership? Limited liability Partnership (LLP) - Hybrid of Corporate & Partnership business Form. Allows the benefits of limited liability with the flexibility of organizing the internal structure as a partnership based on mutually agreed Agreement Gateway for Multi Disciplinary Professionals LLP
Features Separate Legal Identity Body Corporate Non aplicablity Of Partnership Act Only with Profit Motive Limited Liability of Partners Perpetual Succession Features of LLP
Requirements of LLP Contribution Minimum 2 Partners Minimum 2 Designated Partners Designated Partner Identification Number LLP Name LLP Agreement Registered Office
Management of LLP Partners Designated Partners Shareholders Directors
Who can be Partner? Individual Body Corporate And/OR
“Body Corporate” Includes Limited liability partnership registered under LLP Act Limited liability partnership incorporated outside India and Company incorporated outside India, Body Corporate Even all the Foreigners can form a LLP in India. Since a partner need not to be resident in India except a designated Partner who should be resident in India.
Role of Partner For Business Purposes Agent of Limited Liability Partnership, not of other Partners. Right to participate in Management Ethical duty to comply with all provisions of LLP Act and LLP Agreement.
Liability of Partners Limited to the Extent of their Contribution Not Liable for the wrongful Acts /Omissions of other Partners Not Liable for Obligation of LLP arising out of a contract. Unlimited Liability of relevant Partners in case of Fraud.
Designated Partners “Designated partner” means any partner designated as such pursuant to Section 7 of Limited Liability Partnership Act 2008. Responsible for managing the day to day affairs and ensuring the compliances of all applicable laws. Requirement for Designated Partners Only Individual can be the Designated Partners. At least One designated Partner should be resident in India. In case of Body Corporate their nominees can be the Designated Partners. Designated Partner Identification Number
Benefits as Compared to Corporate Form Ω Easy to Form Ω Easy to Run & Manage Ω Low cost of Formation Ω No Minimum Contribution Ω No Stamp Duty as on date Ω Less Government Intervention Ω Less requirement as to maintenance of statutory records Ω Less Compliances Ω No Minimum Alternate Tax as on Date
Benefits as Compared to Partnership Form Ω Unlimited No. of Partners Ω Limited Liability of Partners Ω No Liability for the wrongful act of other Partner. Ω Less exposure to personal assets of the partners
Drawback of LLP Any act of the Partner without the other may bind the LLP. Under some cases, liability may extend to personal assets of Partners. The Act does not provides any provision for raising of money from Public via public issue. Lot of formalities on closure of Business.
Indian Government, Ministry of Finance has not yet specified any regulatory framework for taxing LLPs. Income will be taxed either in the hands of Partner to the extent of their Profits. Tax Liability of LLP OR Alike worldwide LLPs, an option may be there to tax the income either in the hands of the LLP or in the hands of the Partners. Alike traditional Partnership Firms income will be taxed in the hands of LLP
Formation of LLP VI - Certificate of Incorporation I - Deciding the Partners & Designated partners III - Checking name Availability for LLP II - Obtaining DPIN & Digital Signature IV - Drafting of LLP Agreement V - Filing of Incorporation Document
Deciding the Partners & Designated partners Step I Incorporation Parameters for deciding the Partners and Designated Partners: At least 2 Partners - Individuals or Body Corporate Minimum Two Designated Partners of total no. of Partners – Individuals or Nominee of Body Corporate. At least One Designated Partner to be Resident Indian.
Obtaining DPIN & Digital Signature Step II Incorporation DPIN – Designated Partner Identification Number DPIN - 8 digit Numeric Number Online application in Form 7 to Central Government Submitting the physical application along with Identity and Address Proof of the person applying with prescribed fees. Digital Signatures are required for signing of e - forms by Designated Director.
Checking name Availability for LLP Not Prohibited under Emblems ‘Emblems and Names (Prevention of Improper use) Act, 1950 Use of Certain words require prior approval like in case of Bank RBI prior approval is required. e Form 1 to be filed with ROC. Step III Incorporation
Step IV Incorporation LLP Agreement is Optional. In absence of LLP Agreement Schedule 1 will be applicable. In case of Agreement – Draft to be prepared before filing of Incorporation Documents. Registration through e Form 3 – 30 days of Incorporation Registration of LLP Agreement
Features of Schedule 1 All partners entitled to share equally in the Capital and Profits/losses. Indemnity Clause Every Partner shall take part in management No partner shall be entitled to remuneration. No partner introduced without consent of all partners. All decisions with majority of partners consent Minutes to be recorded within 30 days Render True Accounts All Disputes will be referred to Arbitration Act
e Form 2 – Incorporation Document along with Subscription Sheet Certification from Practicing Professional e Form 4 – Consent of Partners & Designated Partners Step V Incorporation V - Filing of Incorporation Document
Certificate of Incorporation On Successful Compliances – ROC LLP Issue Certificate of Incorporation. Conclusive Evidence of Registration of Limited Liability Partnership Step VI Incorporation
Contribution up to 1 lakhFee Contribution More than 10 lakh Fee Form 1 (Name Availability)200 Form 1 (Name Availability) 200 Form 2 (Incorporation Document) 500 Form 2 (Incorporation Document) 5000 Form 3 (LLP Agreement Registration) 50 Form 3 (LLP Agreement Registration) 200 Form 4 (Partners Consent)50 Form 4 (Partners Consent) 200 Incorporation Fee800Incorporation Fee5600 Incorporation Fee Beside this fee the LLP Agreement Stamping Fee would be there as per the respective state stamping requirement – yet to be notified
Conversion of LLP Who can Convert ? Partnership Firm Private Company Unlisted Public Company Whether LLP can convert its status to Corporate Form ? No
Procedure of Conversion of Company to LLP III - Filing of Conversion Application IV - Checking name Availability for LLP VI - Certificate of Registration I - Deciding the Designated Partners VII - Information of Conversion to ROC II - Obtaining DPIN & Digital Signature V- Filing of Incorporation Document
Compliances of LLP EVENT BASED Compliances with ROC LLP REGULAR Compliances with ROC LLP
Event Based Compliances of LLP LLP Form is based on Self Compliance. To have a check on Self Compliance Act has prescribed heavy Penalties on Non - Compliance ComplianceSectione-formTime LimitPenalty for Non - Compliance Filing of Consent of Designated Partners 7(3) Form 4Within 30 days of appointment Minimum 10,000 & Maximum 1,00,000 Filing of Change in Partners 25(2)Form 4 Within 30 days of Change Minimum 2,000 & Maximum 25,000 Filing of Change in LLP Agreement 23(2)Form 3 With in 30 days of Change Minimum 5,000 & Maximum 5,00,000 with an additional fine of Rs. 50 per day after which the default continues. Shifting of Registered Office 13(3)Form 15 Within 30 days of Compliance Minimum 2,000 & Maximum 25,000 Change of Name19Form 5With in 30 days of Compliance. Minimum 5,000 & Maximum 5,00,000 with an additional fine of Rs. 50 per day after which the default continues
Regular Compliances of LLP Filing of Statements of Accounts & Solvency – Within 6 months of closure of Financial Year. Section34(2) Filing of Annual Return – with in 60 Days of closure of Financial Year Section 35(1) Penalty for Non –Filing will be Rs. 100 per day - Rs. 3000 for a month where as in case of Company with a capital of Rs. 1 lakh penalty will be only Rs. 200 for Non –Filing up to 30 days The maximum time limit in which the Forms can be filed along with Penalty is 300 Days thereafter prosecution will be initiated. In case of Non Filing of Annul Return & Statement of Account & Solvency for Consecutive five years the LLP may be wind up.
Foreign LLP Section 59 of LLP Act, 2008 contain provisions regarding Foreign Limited Liability Partnership but Central Government has not specified any rules for Foreign Direct Investment in India through LLP. Benefit For Foreigners Invest in India without being present in India. Brand Reservation. Less No. of Compliances.
Winding up of LLP Alike Companies, LLP may be wound up either Voluntary or by the Order of Tribunal.