analysis on llp

8/12/2019 Analysis on LLP

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Analysis on

Limited Liability Partnership

CA.V.M.V.Subba RaoChartered Accountant


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International Scenario

Limited Liability Partnership has been

prevalent in many countries including USA - ear - !""#

U$ - ear - %### &APA' - ear - %##(

S)'*AP+R, ear %##(

+ur LLP model is based on U$ Singapore


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Journey of LLP in India

)n the year !""/ Abid 0ussain Committee

recommended Legislation o1 LLP in )ndia

)n the year %##2 'aresh Chandra Committee

prepared a Report on LLP

+n !3th4ecember5%##( the LLP 6ill5%##(

7as introduced in Ra8ya Sabha by MCA

+n %/th4ecember5%##/ ParliamentaryStanding Committee submitted a Report to

Lo9 Sabha : Ra8ya Sabha


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Journey of LLP in India (Contn.)

+n %!st+ctober5%##; the Revised LLP

6ill5%##; 7as introduced in Ra8ya Sabha

+n %


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The Limited Liability Partnership

Bill!""#

Constitutional Background

The Central Government hasexclusive power to makeLimited Liability Partnership Act

under Entry o! List " o! the#nion List

=he LLP 6ill5%##;consists o1 > !< Chapters ;! Sections #< Schedules

=he LLP Rules :?orms consists o1> !( Chapters


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Basic $eatures of LLP

LLP is a 6ody Corporate having perpetual

succession.

LLP is a legal entity separate 1rom its

partners.

Any Change in partners o1 a LLP shall not

a11ect the e@istence5 rights or liabilities o1 the

LLP. 'o partner is personally liable to liabilities o1

the LLP


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Liability o1 LLP is not liability o1 individual partners.

LLP must have at least t7o partners

'o ma@imum Limit o1 partners

Any )ndividual or 6ody Corporate may be a partnerin LLP.

Partner is an agent o1 LLP but not o1 other partner.

Ministry o1 Corporate A11airs is administratingAuthority


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=he Provisions o1 )ndian PartnershipAct5!"2% shall not apply to a LLP.

=he Provisions o1 Companies Act5!"3( can

be made applicable 7ith suitable modi1icationby issuing a noti1ication to LLP

)1 the number o1 partners 1all belo7 t7o5 thesurviving partner 7ill have to admit at least

one more partner 7ithin ( months. )1 he doesnot do so5 his liability 7ill become unlimitedand LLP 7ill be 7ound up.


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%esi&nated Partners

' ery LLP shall hae t*o (!)

%esi&nated Partners.' At least one of such desi&nated partner

shall be resident indiidual..

' ery %esi&nated Partner shall obtain%PI+ , %I+ from -CA.


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Incorporation %ocument $orm !

'ame o1 LLP

Proposed 6usiness

Address o1 Regd. +11ice

'ames and addresseso1 Partners

4esignated Partners

Any other in1ormation

prescribed

Similar to M+A

'o provision to amend

)ncorporation

4ocument Provision to Change

'ame5 6usiness :

Registered +11ice

Certi1icate o1)ncorporation by R+C

is conclusive evidence


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Liabilities of %esi&nated Partners

Responsible 1or compliance o1 the provisions

o1 the LLP Act including 1iling o1 various

returns and documents speci1ied in the Act.

Liable to all penalties imposed on the LLP 1or

any contravention o1 those provisions.


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L L P A&reement $orm /

Limited Liability Partnership Agreementmeans any 7ritten agreement bet7een thepartners o1 the LLP or bet7een the LLP and

its partners and its partners 7hich determinesthe mutual rights and duties in relation to thatLLP.

A1ter incorporation5 the LLP may have the

LLP agreement. =he LLP agreement is similar to A + A o1

Company.


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L L P A&reement

)n the absence o1 any LLP agreement the

provisions set-out in ?)RS= SC0,4UL, is

applicable.

)1 the partnership agreement is e@ecutedbe1ore registration o1 LLP the partners 7ill

have to rati1y this agreement a1ter

incorporation o1 LLP and 1ile 7ith R+C


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Clauses in $I0ST SC1%2L

All partners entitled to share eually in the Capitaland Pro1itslosses.

)ndemnity Clause ,very Partner shall ta9e part in management 'o partner shall be entitled to remuneration. 'o partner introduced 7ithout consent o1 all

partners. All decisions 7ith ma8ority o1 partners consent

Minutes to be recorded 7ithin 2# days Render =rue Accounts All 4isputes re1erred to Arbitration Act


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Contribution

Contribution o1 Partner is similar to ShareCapital o1 a Company.

Contribution may be =angible or )ntangible.

Contribution o1 partner consisting o1 =angibleor )ntangible or +ther 6ene1its shall bevalued by the Practicing CharteredAccountant or Cost Accountant or approved

valuer 1rom the panel. 'ature and amount o1 Contribution should be

disclosed in accounts


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%esi&nated Partners and their role

=he Bdesignated partner has no implied

authority to conduct day to day business o1

LLP.

)t is not essential that po7er to conductbusiness should be 7ith designated partner.

Appoint any partner as DManaging PartnerE or

D,@ecutive PartnerE to manage the day to daya11airs o1 LLP


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Accounts and Audit

Statement o1 Account :Solvency

$orm %

=o be 1iled 7ith R+C 7ithin( months 1rom close o1

1inancial year Annual Return

$orm &&

=o be 1iled 7ith R+C 7ithin(# days.

Annual Return to becerti1ied by CompanySecretary +nly

A LLP shall be e@empt 1romthe audit o1 its accounts i1 itsturnover does not e@ceed5in any 1inancial year5 Rs.


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Accounts and Audit

?inancial ear means the period 1rom April ! o1 a

year to the March 2! o1 1ollo7ing year.

All Accounts5 4etails and documents are available

1or public )nspection. Very heavy 1ines 1or delay in 1iling o1 Returns

Minimum Rs.%35###- Ma@imum Rs.3 lacs

+11enses compoundable.

0eavy ?ees 1or late 1iling o1 documents- Rs.!## perday.

Late 1iling up to 2## days is permissible


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3ther Proisions

Compromise5 arrangements or reconstruction

o1 LLP

Ginding up and dissolution o1 LLP

Stri9e o11 de1unct LLP

Liability o1 partner by holding out.

Ghistle 6lo7ing

Assignment and trans1er o1 partnership rights.


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3ther Proisions

)nvestigation o1 a11airs o1 LLP

,very LLP shall have either the 7ords

DLimited Liability PartnershipE or the acronym

DLLPE as the last 7ords o1 its name. Application o1 'ame availability.

Minor can be admitted to the bene1its o1 LLP

,-1iling o1 documents.

)nspection o1 documents 1iled R+C


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SC3+% SC1%2L

)t Contains provisions 1or Conversion o1e@isting Partnership ?irm into Limited

Liability Partnership.


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T1I0% SC1%2L

)t Contains provisions 1or Conversion o1

e@isting Private Company into LimitedLiability Partnership


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$320T1 SC1%2L

)t Contains provisions 1or Conversion o1

e@isting Unlisted Public Company ?irminto Limited Liability Partnership


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TA4ATI3+ 3$ LLP

LLP Act is silent regarding ta@ation o1 LLPunder the )ncome-ta@ Act.

A separate Chapter is reuired under

income-ta@ on ta@ation o1 LLP Pass-through Concept>

Share o1 each partner should be ta@ed in thehands o1 individual partners Has 7as the provision

in case o1 partnership up to !""2I. Let us 7ait and see ho7 LLP and individual

partners are made liable to income-ta@


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T1A+5 632

CA' (')'('*#BBA +A,

C-A+TE+E. ACC,#/TA/T

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