The document provides an overview of limited liability partnerships (LLPs) in India, including:
1) It traces the genesis and development of LLP laws internationally and in India through various committees from 1997-2005.
2) The key features of LLPs in India are that they provide limited liability, require a minimum of 2 partners, have no limit on maximum partners, and offer flexibility in structure while maintaining compliance requirements.
3) LLPs are formed similar to companies and are regulated through the LLP Act 2008 as well as rules on administration, taxation, and other legal frameworks.
2. Agenda
Genesis
Salient Features
Comparison between Partnership/LLP/Private
Limited Co.
Chapters under LLP Act
Rules
LLP in Other Countries
Certain Issues
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3. GENESIS OF LLP
LLP – 1991 in Texas – Loan and savings failures
Uniform Partnership Act 1996 - USA
LLP Act 2000 – UK
Abid Hussain Committee -1997
Naresh Chandra Committee – 2003
JJ Irani Expert Committee – 2005
Naresh Chandra 2nd Committee – July 2005
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4. Concept Paper
Role of service sector
Limitation of Multi-disciplinary partnership
Limitation of no. of Partners
Litigation – joint liabilities in case of partnership
Hybrid between a Company and Partnership
Profession as well as SME
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5. What is LLP
LLP – separate legal entity with unlimited capacity to
do anything a natural person can do – UK
Partnership formed under LLP Act 2008
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6. Salient Features
LLP for all kinds of business
Limited Liability
Simple when compared to a Company
Minimum Partners 2 ; no limit for maximum
Legal Entity – Artificial Juridical Person
Members & Mutual Rights
Designated Partners
Unlimited Capacity – no main objects
Conversion
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7. Salient Features
Cannot be listed
Incorporation Document
Flexibility on internal structure – No BOD etc
Mergers
Winding up
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8. Formation of LLP
Similar to that of formation of Company
Acquire – DSC and DPIN
Register DSC and DPIN with LLP
Check name availability
Download Forms
File Electronically
Track Status
Receive Certificate
Start Business
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9. Advantages
Limited Liability
Members cannot be responsible for the act of any other
member – inter se agreement between members
No Maximum No. of Partners
Easier Operations – Perpetual
Compliances – Succession
No BOD, meetings/minutes
Remuneration
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10. Disadvantages
Compliance – Annual Filings, Solvency, Duplication
One person LLP concept absent
Limitation of 2 member LLP – result in closure
Documents available for public scrutiny
Penalty for non compliance
Silent about Taxation
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12. Regulatory Framework
Legal – Administration
LLP Act 2008 - MCA
- Companies Act 1956 - ROC
- IT Act 2000 - Tribunal
- Indian Partnership Act 1932 - Official Liquidator
- General Clauses Act 1897
- SEBI Act 1972
- CPC 1908
- Other Acts - Professionals
- Advocate Act 1961
- CA Act 1949
- CS Act 1980
- CWA Act 1959
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13. Comparison
Applicable Law
Liability
Perpetual Existence
Separate Legal Entity
Minimum Number
Maximum Members
Documents defining activities
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14. Comparison
Document providing procedure
Management
Compliance/Accounts/Audit
Minimum No. of Directors
Transferability of shares
Conversion
Common Seal
Change of Regd Office
Change of Name
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16. Chapters under the Act
Preliminary
Nature of LLP
Incorporation of LLP and matters incidental thereto
Partners and their relations
Extent & Limitation of LLP and partners
Contributions
Financial Disclosures
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17. Chapters
Assignment & Transfer of partnership rights
Investigation
Conversion to LLP
Foreign LLP
Compromise, arrangement or reconstruction
Winding up and dissolution
Miscellaneous
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18. Schedules
First Schedule - matters relating to mutual rights and
duties -like Table A
Second Schedule – Conversion of firm into LLP
Third Schedule – Conversion of Private Ltd Co into
LLP
Fourth Schedule – Conversion of Unlisted Public
Co. into LLP
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19. LLP Rules
LLP Rules 2009 is notified, additions as and when
need arises
18 chapters, 41 Rules, 4 Annexures, 30 forms
Covers all the sections – Definitions to Winding up,
Compounding , Destruction of old records etc
Concept LLP (Winding up and Dissolutions) Rules
200…
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20. Designated Partner
To be specified in Agreement
One must be a Resident of India
Responsible for all compliance
Body corporate
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21. Audit and Accounts
Proper Books of Accounts
Cash or accrual basis
Statement of Account and Solvency
Audit – Not compulsory unless Turnover is > Rs.40 lacs or
Contribution > Rs.25.00 lacs, conditions of R 24
Appointment by DP, 30 days before closure of FY
Financial year defined as April - March
Penalty – LLP – Rs.25K – Rs.5.00 lacs & DP – Rs.10K -
Rs.1.00 lac
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22. Accounts & Annual Returns
Statement of Account and Solvency Statement to be
prepared within 6 m of end of FY and file Form 8
within 30 days of end of 6 m period
Authenticated by DP
Penalty for non- compliance – Rs.10K to Rs 1.00 lac
for each DP and LLP – Rs.25K to Rs.5.00 lacs.
Annual Return duly authenticated
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23. Auditors
Section 34(4) & Rule 24(8) to 24 (19)
Authority - Designated Partners – other partners ?
When the appointment to be made – 30 days before
the end of each Financial year
Term of appointment – till the next period
Audit exempted – if turnover < Rs.40 lacs or
contribution does < Rs. 25 lacs
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24. Auditors (contd.)
Re-appointment
Remuneration
Removal of an Auditor
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25. Other Countries
USA
UK
Japan
Canada
China
Singapore
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26. TAXATION
Expect to be cleared in the Budget of 2009 –
Probable date is 31.7.09
LLP or members will be taxed
Capital Gains on sale of LLP assets
Receiving Share of accumulated profits?
Transfer of Shares
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27. Taxation (contd.)
UK – Income taxed in hands of partners
UK – Capital Gains on transfer of assets of LLP is
also taxed in the hands of partners as if they own the
same
US - reported in individual returns of the partners
Japan – Each member is directly subject to tax
Singapore – Personally taxed, taxed as self employed
China – passed through and attributed to partners
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28. Issues
Minors, HUF can they be partners?
Act is very small when compared to Co’s Act 1956 –
but looks as if the Rules/Notifications will rule the
Act –
General Names? Small Names ? Disclosure of
Business in Name/ Objection
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29. Foreign LLP
Section 59
Establishment of place of Business in India
Business activity carried on in India
Permission from RBI may be required under FEMA
FLLP has to file certain documents, Accounts and Solvency
Statement in English
Notice of cessation
Certification and Authentication from Notary
Public/Commissioner of Oaths in the Company it is
incorporated
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30. Lots to examine and explore !!
www.llp.gov.in
THANK YOU
www.bhansali.in
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