THE LIMITED LIABILITY PARTNERSHIP
an alternative vehicle
Ritesh Mittal
mrriteshmittal@gmail.com
BACKGROUND &salient
features
• Limited liability concept was introduced in order to adopt a
corporate form, which combines the organizational flexibility
and tax status of partnership with the advantage of limited
liability for its partners
• Passed by the Lok sabha on 12th December 2008 and received
the assent of President on 7th January 2009
• An alternative corporate business vehicle that provides the
benefits of limited liability of a company but allows its
members the flexibility of organising their internal
management on the basis of a mutually arrived agreement, as
is the case in a partnership firm
limited liability partnership
Limited liability partnership means a partnership formed and
registered under this Act
A limited liability partnership
• is a body corporate.
• legal entity separate from that of its partners.
• perpetual succession.
Change in partners does Not effect the existence Rights or
Liabilities of the Limited Liability Partnership
limited liability partnership
Provisions of the Indian Partnership Act, 1932 shall not apply
Provisions of Companies Act may Apply
• Limited Liability Partnership Agreement
written agreement between the partners (or) between the LLP
and its partners which determines the mutual rights and duties
of the partners and their rights and duties in relation to that
LLP;
PARTNERSHIP ACT 1932
COMPANIES ACT 2013
Body corporate
Two or More
Persons
separate legal entity
Lawful
Business
perpetual
succession.
Profit Sharing
Ratio
Common Seal
LLP
PARTNERSHIP ACT 1932
COMPANIES ACT 2013
Stringent Rules
Unlimited Liability
Max Ceiling on
Partners – 20
High Cost
Only Individuals
can be Partners
No Unique Name
LLP
Incorporation fees
LLP VS COMPANY
Other than small
Company
LLP
Capital Stamp Other
Capital Stamp Other
Capital
Fees Duty Forms Total Fees Duty Forms
Total
Diff
1,00,000
500
500
50
1050
5600
1500
600
7700
6650
5,00,000
2000
500
100
2600
21800
1500
900
24200
21600
10,00,000
4000
500
150
4650
36800
2000
1200
40000
35350
50,00,000
5000
500
200
5700 157000
8000
1500 166500
160800
1,00,00,000
5000
500
200
5700 207200 15500
1800 224500
218800
Incorporation fees
LLP VS COMPANY
LLP
Small Company
Capital Stamp Other
Capital Stamp Other
Capital
Fees Duty Forms Total Fees Duty Forms
Total
Diff
1,00,000
500
500
50
1050
2600
1520
600
4720
3670
5,00,000
2000
500
100
2600
2600
1520
600
4720
2120
10,00,000
4000
500
150
4650
2600
2020
600
5220
570
50,00,000
5000
500
200
5700
83000
8020
600
91620
85920
1,00,00,000
5000
500
200
5700
NUMBER OF PARTNERS
• Shall have at Minimum two partners.
• If number of partners is reduced below two and business is
carried on for more than six months the only partner having
Knowledge of the fact , after those six months shall be liable
personally for the obligations of the limited liability
partnership incurred during that period.
• No limit on number of partners
Partner of llp
• An Individual (Sound Mind and Solvent)
• A Body Corporate
a company as defined in section 3 of the Companies Act, 1956
a limited liability partnership registered under this Act;
a limited liability partnership incorporated outside India; and
a company incorporated outside India,
A Body Corporate does not include–
a corporation sole;
a co-operative society registered
any other body which the Central Government may, by
notification in the Official Gazette, specify.
Who can be a Partner
•
•
•
•
•
•
•
Individuals
Limited Liability Partnerships
Companies
Foreign Limited Liability Partnerships
Limited Liability Partnerships incorporated outside India
Foreign companies
Companies incorporated outside India
Designated Partner
A designated is a partner who shall be responsible for
- the compliance of the provisions of this Act including filing of
any document, return and statements.
- liable to all penalties imposed on the limited liability
partnership for any contravention of those provisions.
- Has to sign the Annual Financial Statements and Annual
Solvency Statement
Designated Partner
• shall have at least two designated partners
- Should be individuals and
- at least one of them shall be a resident in India
• Where all the partners are bodies corporate or in which one or
more partners are individuals and bodies corporate,
- at least two individuals who are partners or
- nominees of such bodies corporate
shall act as designated partners.
“resident in India” means a person who has stayed in India for a
period of not less than one hundred and eighty-two days
during the immediately preceding one year.
Appointment of Designated
Partner
• At Incorporation
- Specifying there Name in the incorporation document
- states that each of the partners from time to time is to be
designated partner, every partner shall be a designated partner.
• Subsequent Appointment:
- Partner may become a designated partner or may cease to be a
designated partner in accordance with the LLP agreement.
• Any Vacancy in a designated partner has to be filled within thirty
days else all partner shall be deemed to be a designated partner
• Prior consent to act as designated partner has to be taken.
• Information to filed with the registrar within 30 days
• shall obtain a Designated Partner Identification Number
(DPIN/DIN) DIN 1 & Change in Name in DIN 4
TWO AND MORE
PARTNERS
CHAPTER III
CLAUSE 11 AND 12
EXISTING
CHAPTER X
CLAUSE 55 AND 58
PARTNERSHIP FIRM
SECOND SECHEDULE
PRIVATE LIMITED COMPANY
THIRD SECHEDULE
UNLISTED PUBLIC COMPANY
FORTH SECHEDULE
LIMITED LIABILITY PARTNERSHIP
NEW INCORPORTION
ROUTE
CONVERSION ROUTE
INCORPORATION OF AN LLP
Name Availability norms
In the opinion of Central Government, The Name Should Not be
- undesirable; or
- identical or too nearly resembles to that of any other
partnership firm or
limited liability partnership or body corporate or a registered
trade mark, or a trade mark which is subject of an
application for registration.
Every limited liability partnership shall have either the words
“limited liability partnership” or the acronym “LLP” as the
last words of its name.
Application for Name
Availability
• Apply to the Registrar for the reservation of a name in Form 1
– the name of a proposed limited liability partnership; or
– the name to which a LLP proposes to change its name.
• Once Approval of Name by the Registrar, the Name would be
reserved for a period of three months from the date of intimation
by the Registrar.
direction to change name
Central Government may direct an LLP to change its name if the
Name is identical with or resembles the
- name of any other limited liability partnership or
- body corporate or
- other name as to be likely to be mistaken for it
and the LLP shall comply with the said direction within three
months
• Any entity (LLP or a body corporate) which already has a
similar name may apply to the registrar in Form 23 to give a
direction to any LLP, to change its name within twenty-four
months from the date of registration of the LLP.
• The Name has to changed in Form 28
REGISTRATION PROCESS
• Similar in Lines to the Company Incorporation
• Incorporation Documents to be Filed with the Registrar in
FORM 2 ,
• One partners and a Advocate/ CA/ CS/CWA has to sign the
Application & Declaration for Incorporation.
• Limited Liability Partnership Agreement in Form 3 within 30
days of incorporation
Registration and its impact
On Satisfaction, Registrar shall within a period of fourteen days
- register the incorporation documents and
- give a certificate in the name of the LLP.
-
Once registered, the LLP, by its name, be capable of
suing and being sued;
acquiring, owning, holding and developing or disposing of property
having a common seal,
doing such other acts and things as bodies corporate may lawfully do.
- Subsequent Change in Registered office Form 15
• Subsequent Change in partners Form 4
PARTNER AND THEIR RELATIONS
The persons who subscribed their names to the incorporation
document shall be its partners and any other person may
become a partner of the limited liability partnership by and in
accordance with the limited liability partnership agreement.
The mutual rights and duties between the partners, or between
the limited liability partnership and its partners shall be
governed by the limited liability partnership agreement.
The Provisions of First Schedule would be applicable In the
absence of such agreement
The limited liability partnership agreement and any changes made
therein shall be filed with the Registrar
Cessation of partnership interest
A person may cease to be a partner of a limited liability partnership
- in accordance with an agreement with the other partners or,
- in the absence of agreement with the other partners as to cessation of
being a partner, by giving a notice in writing of not less than thirty
days to the other partners of his intention to resign as partner.
A person shall cease to be a partner of a limited liability partnership–
- on his death or dissolution of the LLP; or
- if he is declared to be of unsound mind by a competent court; or
- if he has applied to be adjudged as an insolvent or declared as an
insolvent.
Where a person has ceased to be a partner, he is still regarded as
partner (in relation to any person dealing with the LLP) unless–
- the person has notice that the partner has ceased to be a partner
of the LLP or
- notice of cessation has been delivered to the Registrar.
IMPACT OF Cessation
unless otherwise provided in the LLP agreement,
The former partner or a person entitled to his share in
consequence of the death or insolvency, shall be entitled to
receive
— an amount equal to the capital contribution, and
— share in the accumulated profits after the deduction of
accumulated losses, as at the date of cessation.
Shall Not have any right to interfere in the management.
Filing of notice with Registrar
Every partner shall inform the LLP of any change in his name or
address within a period of fifteen days of such change in Form 6.
A limited liability partnership shall
— where a person becomes or ceases to be a partner,
—where there is any change in the name or address of a
partner, file a notice with the Registrar within thirty days of
such change in Form 4.
A person who ceases to be a partner may himself file with the
Registrar, if he believes that the LLP may not file the Notice.
The Registrar shall obtain a confirmation to this effect from the
LLP.
If No confirmation is received within fifteen days, the registrar
shall register the notice made by a person ceasing to be a partner.
EXTENT OF LIABILITY - OF llp
• Every partner is the agent of the LLP, but not of other partners.
• An obligation of the LLP shall be solely the obligation of the LLP.
• The liabilities of the LLP shall be met out of the property of the
LLP.
• A LLP is not bound by the acts done by a partner in dealing with
a person if
- the partner has no authority to act for the LLP in doing a
particular act, and
- the person knows that he has no authority or does not know or
believe him to be a partner.
•
The LLP is liable if a partner is liable to any person as a result of
a wrongful act or omission on his part in the course of the business
or with its authority.
EXTENT OF LIABILITY – OF PARTNER
• A partner is not personally liable solely by reason of being a
partner of the LLP.
• A partner Shall be personally liable for his own wrongful act or
omission,
• A partner shall not be personally liable for the wrongful act or
omission of any other partner of the limited liability partnership.
Other points
• Holding out – Wrong Full representation
• Unlimited liability in case of fraud.
• Whistle blowing.
contribution of a partner
• contribution may consist of tangible, movable or immovable or
intangible property or other benefit to the LLP.
• The monetary value of contribution of each partner shall be
accounted for and disclosed in the accounts of the LLP.
•
The obligation of a partner to contribute shall be as per the
LLP agreement.
• A creditor of a LLP, which extends credit or otherwise acts in
reliance on an obligation described in that agreement, without
notice of any compromise between partners, may enforce the
original obligation against such partner.
ASSIGNMENT AND TRANSFER OF
PARTNERSHIP RIGHTS
•
The rights of a partner to a share of the profits and to receive
distributions are transferable.
• The transfer of right does not entitle the transferee or assignee
- to participate in the management
- or access information concerning the transactions
• The transfer of any right by any partner does not cause the
disassociation of the partner or a dissolution and winding up of
the LLP.
FINANCIAL DISCLOSURES
• Accounts may be maintained on cash or accrual basis at the
registered office.
• Audit of LLP is Mandatory if
– Turnover in any FY exceeds forty lakh rupees, or
– Contribution exceeds twenty-five lakh rupees :
Annual Statement of Accounts and
Solvency – form 8
• Annual Statement of Accounts and Solvency in Form 8 to be
prepared , duly authenticated within 6 Months from the end of the
Financial Year.
– Should be filed with 30 days from the end of 6 Months
Annual Statement of Accounts and
Solvency – form 8
Annual Statement of Accounts and
Solvency – form 8
part a – statement of solvency
Annual Statement of Accounts and
Solvency – form 8
part b – statement of accounts
Annual Statement of Accounts and
Solvency – form 8
verification column
Annual Return
• Annual Return to be filed with the Registrar within 60days of the end
of the financial year in Form 11.
• Certificate from a Company Secretary
• Not Required for LLP having
– turnover upto five crore rupees during the corresponding FY or
– contribution upto fifty lakh rupees
• certificate from a designated partner, other than the signatory to the
annual return, to the effect that annual return contains true and
correct information.
• In all other cases, the annual return shall be accompanied with a
certificate from a Company Secretary in practice to the effect that he
has verified the particulars from the books and records of the limited
liability partnership and found them to be true and correct.
Annual Return – form 11
Annual Return – form 11
WINDING UP of llp
A LLP may be wound up by the Tribunal,—
- if the LLP decides that LLP be wound up.
- The number of partners is reduced below two for more than
six months
- if the LLP is unable to pay its debts
- if the LLP has acted against the interests of the sovereignty
and integrity of India
- if the LLP has made a default in filing with the Registrar the
Statement of Account and Solvency or annual return for any
five consecutive financial years; or
- if the Tribunal is of the opinion that it is just and equitable
that the limited liability partnership be wound up.
MISCELLANEOUS
• A partner can lend money or transact other business with the
LLP and has the same rights and obligations as that of a Non
Partner.
• Electronic filing of documents and use of digital signature
certificates- www.mca.gov.in.
Additional fee for document or return filed with registrar
Upto due date – Normal Fees (NF)
Next 300 days – NF+ Rs 100 Per day
After 300 days – NF+ Rs 100 Per day + Penalty
LATE FILING FEES
Taxation of LLP
• Section 2 clause (23) is amended by the Finance (No. 2) Act, 2009,
w.e.f. 1-4-2010:
(i) “firm” shall have the meaning assigned to it in the Indian
Partnership Act, 1932 (9 of 1932), and shall include a limited
liability partnership as defined in the Limited Liability Partnership
Act, 2008
(iii) “partnership” shall have the meaning assigned to it in the Indian
Partnership Act, 1932 (9 of 1932), and shall include a limited
liability partnership as defined in the Limited Liability Partnership
Act, 2008 (6 of 2009);
Incorporation of LLP
Form No
Particulars
Get Digital Signature
DIR 3
Apply for DPIN Number
Form 1
Application for reservation or change of name
Form 2
Incorporation document and subscriber’s
statement
Form 3
Information with regard to limited liability
partnership agreement and changes, if any, made
therein
MCA.GOV.IN
FORMS AND DOWNLOADS
DOWNLOAD FORMS
DIR 3 – application for din
(old din 1 form)
DIR 3 – application for din
(old din 1 form)
DIR 3 – application for din
(old din 1 form)
MCA.GOV.IN
FORMS AND DOWNLOADS
DOWNLOAD FORMS
NAME AVAILABILITY – FORM 1
6 NAMES
INCORPORATION DOCUMENT FORM 2
INCORPORATION DOCUMENT FORM 2
FORM 2 ATTACHEMNENTS
INCORPORATION DOCUMENT FORM 2
INCORPORATION DOCUMENT FORM 2
LLP AGREEMENT – FORM 3
LLP AGREEMENT – FORM 3
late filing fees
RITESH MITTAL
mrriteshmittal@gmail.com
9885377421