LIMITED LIABILITY PARTNERSHIP

Presented By: Poonam Bansal Damanpreet Kaur Chandan Kumar Gupta Ranjeet Singh

1. Introduction 2. Features 3. Governance 4. Incorporation a. Requirements

Contents

b. Procedure 5. Conversion from/to LLP 6. Administration a. Accounts & Returns b. Relationship of Partners c. List of Forms & uses d. Admission, Retirement & Death of Partner 7. Audit and Taxation 8. Comparison 9. Foreign LLP/FDI in LLP 10. Dissolution/Winding up 2

 

Introduction

L

imited

L

iability

P

artnership Hybrid between private ltd. company & partnership firm

Partnership Firm Private Limited Companies

   Indian government passed LLP Act on 09/01/2009 LLP Act,2008 gets notified w.e.f March 31 st , 2009 The first LLP was registered on April 2,2009

Limited Liability Partnership

Need for LLP

: Major causes for the advent of LLP are   To enable the professionals to deal in international activities on the concept of Limited Liability which was earlier not possible due to various restrictions To remove the restriction posed by Indian partnership Act, 1932 that professionals are not allowed to have more than 10 or 20 partners.

LLP Act removed the above ob stacles.

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Features

 Limited liability of partners.

 Flexible form of organization.

 Administration according to LLP agreement.

 Required to register with ROC.

 LLP agreement is the main incorporation document.

 The economic rights of partners are freely transferrable.

 Perpetual Succession.

 Separate legal entity.

 Every partner is an agent of the LLP but not liable for the wrongful acts of other partners.

 In the absence of any provision for distribution of profits/ losses, partners are entitled to share profits and losses equally.

 LLPs are not allowed to operate as Not for profit organization 4

Governance



By Limited Liabilities Partnership Act 2008



By Limited Liabilities Partnership Rules 2008



By Registrar of Companies



By LLP Agreement between Partners

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Incorporation

Requirements

Partners: Minimum two designated partners are required and no Capital: Names: Objects: limit on maximum No limit on maximum and minimum capital contribution At least two proposed names are required As per LLP Agreement Documents: 1) ID, Address proof and photo of all Partner and DPs.

2) LLP Agreement duly stamped as per relevant Stamp Act of the State.

3) Subscriber Statements 4) Consent Letter from all Partner and DPs as per form9 5) Proof of Address of Registered Office 6

Procedure

Once approved by ministry, LLP is registered File incorporation document & Subscriber’s Statement in form 2 6 7 File LLP Agreement in form 3

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Steps for Incorporation of LLP 1 3 2 DP will apply for DIN Register DSC on MCA site 5 4 DSC to be applied by DP File form 1 for name approval Apply for new user registration 7

Conversion from/to LLP

CONVERSION OF A PRIVATE / UNLISTED PUBLIC COMPANY INTO LLP

 Application for conversion in

Form 18

with the following attachments :  Statement of shareholders (may be attached in a tabular form)  Incorporation Document & Statement in Form 2 filed electronically.

 Statement of Assets and Liabilities of the company duly certified as true and correct by the Chartered Accountant in practice.

 List of all the creditors along with their consent to the conversion (may be given in the form of a tabular statement).

 Copy of acknowledgement of latest income tax return.

 Particulars of pending proceedings from any court/Tribunal etc.

 Once converted into LLP, it can not be converted back to private/unlisted public company 8

Administration

 ACCOUNTS  Accounts must be prepared for a financial year.

 Methods of Accounting – Cash or Accrual  Books of Accounts shall include 1) Details of all receipts and payments.

2) Records of assets and liabilities.

3) Statements of stock.

4) Any other records which the partners decide.

 Records to be preserved For 3 years from the date they were first made.

 RETURNS  Statement of account & solvency to be filed with ROC within 6 months of close of financial year in form 8.

 Must file an annual return with registrar within 60 days from the end of financial year in form

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.

 Must be accompanied by certificate issued by CS confirming veracity of particulars / statements in return, if turnover exceeds Rs. 5 crores or contribution by all the partners exceeds Rs. 50 Lacs, else certificate must be issued by DP. 9

Relationship of Partners

 Governed by LLP Agreement  In absence of any agreement, principles set out in First Schedule will apply  Registration of changes in partners / details of partners to be filed in ‘ Form-6 ’ • • • • Schedule I Equal Share in capital & profits / losses Partners not entitled to any remuneration for acting in business or management of LLP No admission of partner without consent of all other partners Any ordinary matter regarding LLP may be decided by resolution passed by majority of partners 10

List of Forms & their uses Form DIN 1 Form DIN 4 Form 1 Form 2 Form 2A Form 3 Form 4 Form 4A Form 5 Application for allotment of Director Identification Number Intimation of change in particulars of Director to be given to the Central Government Application for reservation or change of name Incorporation document and subscriber’s statement Details in respect of designated partners and partners of Limited Liability Partnership Information with regard to limited liability partnership agreement and changes, if any, made therein Notice of appointment, cessation, change in name/ address/designation of a designated partner or partner. and consent to become a partner/designated partner Notice of appointment, cessation, change in particulars of a partners Notice for change of name 11

Form 8 Form 11 Form 12 Form 15 Form 17 Form 18 Form 22 Form 23 Form 24 Form 25 Statement of Account & Solvency Annual Return of Limited Liability Partnership (LLP) Form for intimating other address for service of documents Notice for change of place of registered office Application and statement for conversion of a firm into Limited Liability Partnership (LLP) Application and Statement for conversion of a private company/ unlisted public company into limited liability partnership (LLP) Notice of intimation of Order of Court/ Tribunal/CLB/ Central Government to the Registrar Application for direction to Limited Liability Partnership (LLP) to change its name to the Registrar Application to the Registrar for striking off name Application for reservation/ renewal of name by a Foreign Limited Liability Partnership (FLLP) or Foreign Company 12

Form 27 Form 28 Form 29 Form 31 Form 32 Form for registration of particulars by Foreign Limited Liability Partnership (FLLP) Return of alteration in the incorporation document or other instrument constituting or defining the constitution; or the registered or principal office; or the partner or designated partner of limited liability partnership incorporated or registered outside India.

Notice of (A) alteration in the certificate of incorporation or registration; (B) alteration in names and addresses of any of the persons authorised to accept service on behalf of a foreign limited liability partnership (FLLP) (C) alteration in the principal place of business in India of FLLP (D) cessation to have a place of business in India Application for compounding of an offence under the Act Form for filing addendum for rectification of defects or incompleteness 13

Admission, Retirement & Death of Partner(s)

 Unless the LLP agreement says otherwise, the admission of a new member requires the unanimous consent of the existing members  An LLP agreement can provide mandatory retirement but it needs to be objectively justified  Existence of LLP is not affected by admission, retirement or death of partner(s) provided minimum no. of partners are maintained 14

Audit & Taxation

 Requirement of Audit  Statutory audit is mandatory if annual turnover is more than ` 40 lacs or contribution exceeds ` 25 lacs  Tax audit is mandatory if turnover exceeds ` 60 lacs  Taxation on LLP  LLP’s will be treated as Partnership Firms for the purpose of Income Tax w.e.f assessment year 2010-11  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 instead AMT has been introduced alike to MAT.

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 Remuneration to partners will be taxed as “Income from Business & Profession”  No capital gain on conversion of partnership firms/company 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  On conversion, the successor LLP will be allowed to amortize the expenditure incurred under voluntary retirement scheme on conversion, the successor LLP will not be allowed to take the credit of MAT paid by the predecessor company.

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Comparison between firm and LLP

Basis Partnership Firms LLP

Governing Law Partnership Act, 1932

Registration

Limited Liability Partnership Act, 2008 Compulsory

Creation Legal Status Succession Ownership Assets Liability of Partners Minor’s Position of

Not Compulsory; preferred but is By partnership Agreement Partners collectively known as ‘Firm’; no separate legal status Firm would cease to exist on change in partnership, unless otherwise provided in agreement Partnership cannot own assets in its name; assets must be in name of Partners

Unlimited

Minor can be admitted to benefits of Partnership By Law LLP has separate legal status apart from partners LLP would not be affected on change in partnership (Perpetual Succession) LLP can own assets in its own name

Limited

Law silent on position of Minors 17

Comparison between Pvt. Ltd. Co. and LLP

Basis Governing Law Name Common Seal Company

Companies Act, 1956 Must contain suffix ‘Ltd’ or ‘Pvt Ltd’ Common Seal is compulsory

LLP

Limited Liability Partnership Act, 2008 Must contain suffix ‘LLP’ Common Seal is optional

Organizational Structure Appointment of Auditors Audit

Rigid & Companies Act governed by Specific Resolution required for appointment of auditors at every AGM All companies are subject to audit of accounts Flexible & governed by LLP Agreement Auditors shall be deemed to be re-appointed in case no specific appointment is made (unless otherwise decided) Only LLPs having turnover of more than Rs. 40 Lacs or contribution of more than Rs.

25 Lacs are subject to audit of accounts 18

Foreign LLP/ FDI in LLP

 Foreign LLP  Means a LLP which is formed, registered or incorporated outside India and which establishes a place of business in India  FLLP is required to file form 25 for approval of name  If FLLP has been incorporated in language other than English then it has to be certified by a notary public of their respective country in English language  If translation has been made in India then such translation is required to be certified by CA/CS/CWA/Advocate  Foreign LLP shall, within 30 days of establishment in India required to file form 27 within 30 days from its establishment  FDI  LLPs with FDI will be allowed, through the Government approval route, in those sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance related conditions.

 LLPs with FDI will not be allowed to operate in agricultural/plantation activity, print media or real estate business.

 LLPs with FDI will not be eligible to make any downstream investments 19

DISSOLUTION/WINDING UP

Compulsory Voluntary  Where the Partners of LLP themselves mutually decides By Tribunal Conditions:  If the LLP decides that it to be dissolved by Tribunal  If no. of partners falls below 2 for more than 6 months  If LLP is unable to pay its debts.

 If LLP has acted against interest of the sovereignty and integrity of India, security of state or Public order  Tribunal is of opinion that it is just and equitable  On declaration of LLP as defunct(Suomoto by LLP or if it is not carrying business for 1 year or more)

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