Limited Liability Partnership

ACT 2008

By
AKHIL KHANNA
B.COM(H)
UNIVERSITY OF DELHI
 International Experience
• FRANCE :- LLP brought under Regulation first in 1673

• UNITED STATES, - first introduced in New York in1822

• Non Compliance of laws resulted in liability of partners becoming
unlimited.
o Uniform Limited Partnership law was enacted for protection
o Hewlett- Packard are LLPs in operation

• UNITED KINGDOM: - LLP act passed in 1867.

o Came into force in 1907
o Not being popular in UK, was replaced by LLP Act, 2000
o Act designated the constituents of LLP as members and designated
members as agents of LLP
 LLP background in India
• The Abid Hussain Committee recommended
legislation on LLP in 1997.
• Naresh Chandra Committee Report II(2003) revived
the idea of LLP by less regulatory impact of
Companies Act.
• The J.J. Irani Committee(2005) recommended
adoption of LLP as a new form of business.
• LLP Bill, 2006 was introduced in Rajya Sabha on 15th
December,06.
• Later referred to Department Related Parliamentary
Standing Committee on Finance.
 What is LLP?
Limited Liability Partnership is a
• Partnership formed and registered under this Act
• Legal entity separate from its partners
o with perpetual succession and
o with limited liability of its partners
• Body Corporate with capacity to
o acquire, hold & dispose property in its own name
o Sue and be sued independent of its partners
Why LLP Act Passed?

• Potential for growth of the services sector

• Dominant role played by the professionals in

the country’s economy
 Incorporation of LLP
• Two or more persons carrying a lawful business
shall subscribe to an incorporation document.
• Name to have ‘Limited Liability Partnership’ or ‘LLP’
as the last words.
• Reservation of name in Form 1 – for 3 months
• Name not to be identical or too nearly resembles
any other
o Partnership Firm,
o LLP,
o Body Corporate
o a registered trade mark
– if resembles CG may direct to change the name – 3
months to change (Section 17)
 Partner in LLP
• Any Individual who is
o of sound mind
o Solvent
or
• Body Corporate
can become a partner of LLP.
 Body Corporate
Body Corporate includes
• Company incorporated in & Outside India
• LLP incorporated in India & outside India
• Registered Cooperative Society

But does not include

• Corporation Sole
• Cooperative Society
• Partnership firm or HUF
 Conversion into LLP
• Application for Conversion
o Form 17 – From Partnership firm to LLP (Schedule II)
o Form 18 – From Private company to LLP (Schedule III)
o Form 18 – From unlisted public company to LLP (Schedule
III)
• Incorporation documents also to be submitted
• All partners required to apply for conversion
• Registrar to give Certificate in Form 19
• If rejected, appeal can be filed with NCLT
• Intimation of conversion to be intimated to ROC in 14 days
in Form 14
• Penalty for Non- Compliance
o Min. 10,000
o Max. 1,00,000
 Tax Treatment
Benefits of Conversion of Private Limited Company into
LLP
• Taxation LLPs are taxed like general partnership firms.
LLPs pay an effective tax of 30.9%.
• They are exempted from 10% surcharge. LLPs tax
payment is lower than that of companies/firm, which pay a
33.99% tax on profits.
• The tax will be imposed only on 40% of the LLP.s income,
since the firm will be allowed to pay the balance 60% to the
partners as remuneration. This means, the partners will have
to pay tax on the amount paid to them.
 No Audit requirement Audit is not required
unless capital exceeding Rs. 25 lakh or turnover
exceeding Rs. 40 lakh.
 Unlike Companies, no requirement for payment of
Corporation Tax on distribution of income
among partners and shareholders.
 there is no requirement as to Minimum Alternate
Tax.
 Automatic transfer ,All the assets and liabilities of
the Company immediately before the conversion
become the assets and liabilities of the LLP.
No Stamp Duty -All movable and immovable properties
of the company automatically vest in the LLP. No
instrument of transfer is required to be executed and
hence no stamp duty is required to be paid.
No Capital Gains tax shall be charged on transfer of
property from Company to LLP.
The accumulated loss and unabsorbed depreciation of
Company is deemed to be loss/ depreciation of the
successor LLP for the previous year in which conversion
was effected. Thus such loss can be carried for further
eight years in the hands of the successor LLP.
No Limit on number of shareholders/partners
Unlike private limited companies (shareholders
limited to 50), an LLP can have unlimited number of
partners.
Minimal Compliance Level & Cost effective model
There is no need of compliances related to
meetings and maintenance of huge statutory
records.
 Partnership vs. LLP

Partnership LLP
Legal Entity Not Separate Separate
Perpetual No Yes
succession
No. of Min. 2 Max. 20 Min2 , Max NA
members
Governing Indian Partnership LLP Act….
law Act
 Partnership vs. LLP
Partnership LLP
Partner’s No legal DP to obtain DPIN
Identity requirement
Liability Unlimited Limited to
contribution
Names No regulation Regulated
Audit Only if turnover Only if turnover
exceeds 40L – exceeds 40L or
44AB contribution 25 L
 Company vs. LLP

Company LLP
Legal Entity Separate Separate
Perpetual Yes Yes
succession
Capital 1 Lakh for Pvt. & 5 Contribution as
Requirement Lakh for Public Ltd. per LLPA
Cos.
No. of Pvt-Min2 Max 50 Min2 , Max NA
members Pub-Min3 Max NA
 Company vs. LLP

Company LLP

Names Regulation Regulated - other

partnership names
cannot be kept
Flexibility of Regulated by Regulated by LLPA
business MOA & AOA
 Company vs. LLP
Company LLP
Most Large businessesProfessionals
preferred by
Listing Possible Not possible
Audit Compulsory Only if turnover
exceeds 40L or
contribution 25 L
Shareholders No consent Partners consent
required required
Meetings Regulated by Not mandatory
Companies Act
 Company vs. LLP
Company LLP
Suffix 'Limited' or 'Limited Liability
'Private Limited' Partnership' or 'LLP'
Common Seal Compulsory Optional
Flexibility of Regulated by Regulated by LLPA
business MOA & AOA