Presentation on theme: "Limited Liability Partnership - LLP. Points of Discussion………. What is a LLP? Features of LLP Company V/S LLP Taxation Impact Starting trouble for LLP."— Presentation transcript:
Points of Discussion………. What is a LLP? Features of LLP Company V/S LLP Taxation Impact Starting trouble for LLP CA’s looking out to practice 2
3 What is a LLP ? A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore exhibits elements of partnerships and corporate. It is an alternative corporate business vehicle that provides the benefits of limited liability of a company, but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.
Features Of A LLP 4 Renowned form of business: Easy to Form: Body Corporate: Liability: Perpetual Succession: Flexible to Manage: Easy Transferable Ownership: Separate Property: Taxation: Raising Money: Compliances:
5 CompanyLLP Minimum Statutory fee for incorporation of Private Company is Rs.6,000/- and minimum Statutory fee for incorporation of Public Company is Rs. 19,000/- Minimum cost of Formation of LLP is Rs. 800 only Memorandum and Article of Association is the charter of the company which defines its scope of operation LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners. 2 to 50 members in case of Private Company and Minimum 7 members in case of Public Company. Minimum 2 partners and their is no limitation of maximum number of partners. In case of death of member, shares are transmitted to the legal heirs. In case of death of a partner, the legal heirs have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners.
Taxation Impact…… 6 LLP’s will be treated as Partnership Firms. No surcharge will be levied on income tax. Profit will be taxed in the hands of the LLP and not in the hands of the partners. Minimum Alternate Tax and Dividend Distribution Tax will not be applicable for LLP. Remuneration to partners will be taxed as “Income from Business & Profession”. No capital gain on conversion of partnership firms into LLP. Designated Partners will be liable to sign and file the Income Tax return. LLP shall not be eligible for presumptive taxation. Capital Gain on conversion of Company into LLP will be exempt from tax, if prescribed conditions are complied with. On conversion, the successor LLP, will be allowed to carry forward and set off of accumulated loss and unabsorbed depreciation allowance.
Starting Trouble for LLP Model 7 Realising the significance of LLP as a business vehicle, the Cabinet Committee on Economic Affairs approved foreign direct investment (FDI) in LLPs, with need for Government approval in sectors where 100 per cent investment is otherwise automatically permitted to companies. However, the Reserve Bank of India is yet to notify detailed regulations. The lack of clarity on FDI norms has caused entrepreneurs to rethink their LLP plans. In India, overseas borrowings are governed by the Foreign Exchange Management Act. FEMA is not clear on whether LLPs can borrow money from foreign markets.
CA’s looking out to practice 8 LLP is already a renowned business organization worldwide and most of big professional firms like PWC, EY etc. are registered in form of LLP. The concept of LLP offers great opportunity to professionals like CA/CS/CWA/Advocates to develop, as now they can enter into partnerships with professionals of different disciplines for instance, a CS can enter into partnership with CA Let’s read through the Chartered Accountants Act, 1949 to get precise knowledge and inputs on the above.