“Emerging Business
Vehicle”
Limited Liability Partnership
CA Sudhir Bhansali, Jaipur
1
Index
• What is LLP?
• Why LLP?
Overview
• How to Form LLP?
• Compliance ?
• Who Can Convert as LLP?
Formation ,Compliance and
Conversion
• Comparison between different
business forms.
Comparison
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Overview
• 2003: Naresh Chandra Committee Report highlighted need
for LLPs & suggested application of LLPs to Service industry,
Chartered Accountants, Lawyers, Architects, etc.
• 2005: J J Irani Expert Committee on Company Law
recommended
introduction
of
LLPs-suggested
small
enterprises be included in scope of LLP & there should be a
separate LLP Act
• 2006: LLP Bill introduced in Parliament
• 2007: Bill referred to Parliamentary Standing Committee
(PSC) for examination
• 2008: Lok Sabha passes New LLP Bill as revised by PSC
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Overview
- LLP Act-2008
Lok Sabha on 12.12.2008
President assent on 07.01.2009
LLP Rules-2009 Notified on 01.04.2009
- Constituent of LLP Act, 2008
81 Section
14 Chapters
4 Schedules
Schedule 1 : Mutual Rights and Liabilities in the absence of
any matter in LLP Agreement.
Schedules 2,3,4: Relating to conversion.
- LLP
Rules- 2009
Chapter- 16
Rules - 40
Forms- 31
Annexure-03
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What?
 - Contributions can be tangible, intangible, movable or
immovable.
 - Firm, Private Company and unlisted public
Company may be converted into LLP
 - Limit liability of partners to the extent of their
contribution.
 - Provides flexibility without imposing detailed
requirements and on the basis of an mutual
agreement.
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Highlights of LLP
Body Corporate
Section 2(1)(d)
Separate Legal Identity
Section 3(1)
Perpetual Succession
Minimum 2 Partners and
Max.-No Limit Section -6
Section 3(2)
Only with Profit Motive
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Non applicability of
Partnership Act. Section-4
WHY?
- Unlimited No. of Partners
- Separate legal entity & body corporate.
- Limited Liability of Partners
- LLP is liable to the extent of assets.
- No Liability of a partner for the wrongful act of other
partner.
- No exposure to the personal assets of partners except in
case of fraud.
- Harsh New Companies Act 2013
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Why?
-Easy to Form, Run , manage and to Winding up.
- Allows Multi-disciplinary professionals like International
professional firm.
- Governance through mutual agreement.
-No Minimum Contribution
- Low compliance burden & cost
- Taxation like general partnership.
- No wealth Tax.
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Partners (Sec.-5) / Designated Partners (Sec.-7)
 Partners (Sec.-5) Any Individual or/and body corporate may
be partner including foreigner.
 Designated Partners (Sec.-7)
 - Designated
partner : -
- At least two
- Individuals and at least one of them shall be resident in India.
- Managing the affairs and ensuring the compliance of laws.
 - Requirements for Designated Partners : -
-
Designated Partner identification Number (DPIN)
- Only Individual can be the Designated Partners.
- One should be resident of India.
- In case of Body corporate their nominees can be Designated
Partners.
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Contribution Sec-32 & 33
- Each
partner shall bring contribution in LLP
- Contribution can be by way of movable, immovable,
tangible or intangible.
-“Contribution by way of service contract” or
“tangible/Intangible (other than cash)” it shall be valued by
a Practicing CA/CWA/Approved Value.
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Rights and Liability of Partner
Rights :
-Right to participate in Management
-For Business Purposes Agent of LLP, not of other
Partners.
-Ethical duty to comply with all provisions of LLP Act and
LLP Agreement.
Liability
-Limited to the Extent of their Contribution
-Not Liable for the wrongful Acts of other Partners
-Not Liable for Obligation of LLP arising out of a contract
-Unlimited Liability of Partners in case of Fraud.
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How- Formation ?
Formation
C- Name
for LLP
(Form-1)
ADeciding
the
Partners &
Designate
d partners
BObtaining
DPIN
(Form-7) &
Digital
Signature
D- Filing of
Incorporation
Document
(Form-2)
ECertificate
of
Incorporati
on
F – Filing of
LLP
Agreement
(Form-3)
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How -Step A
Decide about Partners & Designated partners
-At least 2 Partners
- Individuals or Nominee of Body Corporate
- Minimum Two Designated Partners out of total no. of
Partners –Individuals or Nominee of Body Corporate.
-At least One Designated Partner to be Resident of India.
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How-Step B
Obtaining DPIN (Form-7) & Digital Signature
- DPIN
– Designated Partner Identification Number of
- 8 Digit Numeric Numbers.
- File Online application in Form 7 for DPIN
- Submission of the physical application along with Identity
and Address Proof of applicant.
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How-Step C
Name Availability for LLP (Form-1)
- e Form 1 to be filed with ROC
-The
word ‘LLP’ shall be the last word of name.
-Not to be identical or nearly resembles to any other Firm,
LLP, Body Corporate and trade mark name. (Section-15)
- Not to be Prohibited under Emblems ‘Emblems and
Names (Prevention of Improper use) Act, 1950 and Rule-18.
-If business includes Banking, NBFCs activities, chit funds,
Micro finance (A copy of in principle approval of
appropriate authority to be obtained).
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How –Step D
Filing of Incorporation Document
-e Form 2 – Incorporation Document along with Subscription Sheet and proof
of address of registered office of LLP.
- Total incorporation fees
Documents
Form 1 (Name
Availability)
Form 2 (Incorp.
Document)
Form 3 (LLP
Agreement Reg.)
Form 4 (Partners
Consent)
Total Incorp. Fee
Fee in Rs. Fee in Rs. Fee Rs.5-10
Up to
1-5 Lac
Lac Contrib.
1Lac
Contrib.
Contrib.
Fee in Rs.
More than10
Lac Contrib.
200/-
200/-
200/-
200/-
500/-
2000/-
4000/-
5000/-
50/-
100/-
150/-
200/-
50/-
100/-
150/-
200/-
800/-
2400/-
4500/-
5600/-
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Part E Certificate of Incorporation
Full Compliances – Registrar Issues Certificate of
Incorporation.
-On
- Total and conclusive Evidence of Registration of “Limited
Liability Partnership”
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How STEP- F
LLP Agreement
 There should be agreement between the partners interested in
forming the LLP.
 Forms the basis of the formation of LLP and lays down its
founding structure.
 The LLP agreement is an agreement between the Partners and
between the LLP & its partners.
The basic contents of Agreement are :
 Name of LLP.
 Name of Partners & Designated Partners.
 Form of contribution.
 Profit Sharing ratio.
 Rights & Duties of Partners.
 If no matter in agreement is entered into, the rights & duties
as prescribed under Schedule I to the LLP Act shall be
applicable.
CA Bhansali Sudhir
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18 Every change made in agreement must be intimated ROC.
How-Step G
Registration of LLP Agreement
-Execution
of LLP Agreement is mandatory (Section-23).
-In absence of Agreement any matter,Schedule 1 will be
applicable.
-Filing of details of LLP Agreement through e Form 3 –in 30
days of Incorporation.
- Stamp duty on LLP agreement as per State Stamp Act.
-Under Income Tax, interest and remuneration or
commission to partners will be allowed as deduction if
payment is authorized by written LLP Agreement.
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Features of Schedule 1
-All partners entitled to share equally in Capital/profit loss.
- Indemnity to the partners on personal liability in proper
conduct of business.
- Every Partner shall take part in management
- No partner shall be entitled to remuneration.
- No partner introduced without consent of all partners.
- All decisions with majority of partners consent
- Minutes to be recorded within 30 days
- Render True Accounts
- All Disputes will be referred to Arbitration Act
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Compliances
-All above forms to be filled in 30
days
-Delay filing of Form - Rs. 100 per
day up to 300 days
beyond 300 days will attract
additional fees
and action against DP and LLP.
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Filling on the Basis of Event
Compliance
Consent of Designated Partners
U/s Sec 7(3)
Change in Partners
U/s Sec. 25(2)
Form 3 / Form 4
LLP Agreement & Changes therein U/s Sec 23(2)
Form 3
Shifting of Registered Office
U/s Sec 13(3)
Form 15
Change of Name
U/S Sec. (19)
Form 5
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Form 4
Regular
 Maintenance of proper Books and Audit (Sec- 34 &35)
Double Entry System and preserved for at least 8 years
at RO
 Audit of Accounts
Turnover of 40 Lac or Contribution of 25 Lac and above)
Form-8
 (Statements of Accounts & Solvency) in 30 days from
the end of 6 months (October) from the closure of Year.
Form-11
 (Annual Return) – Within 60 Days of closure of Year
Means May every year.

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
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Who Can Convert?
 Partnership Firm
 Private Company
 Unlisted Public Company
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Conversion of Company/Firm (Sec 55-58)
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I - Deciding the
Partners &
Designated
Partners
VI - Certificate of
Conversion into
LLP (Form 19)
II - Obtaining
DPIN & Digital
Signature
V - Filing of
Conversion
Application (Form
)17/18
III – Reservation
of Name for LLP
(Form-1)
IV- Filing of
Incorporation
Document (Form2)
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VII - Intimation
of Conversion
to ROC (Form
14)
Requirement for conversion
All the Members of the Company/partners shall be the in LLP
with same capital or contribution ratio.
• Consent of all Members of the Company/partners.
• NOC from Unsecured creditors or from other authority (if
required).
• Financial Statements certified by Auditor of not more than 30
days of date of the conversion application.
• All due returns of ROC/Tax authorities shall be filed.
•Conversion Certificate to be filed within 15 days
with the ROC in Form 14 .
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Foreign LLP (Sec-59) and Incorporated Outside India (LIOI)]
- Section 59 contain provisions regarding establishment
of the place of business by Foreign LLP within the India .
Filing of Form-27
- 30 days from establishment of place of business in
India.
- Permission/approval of RBI required for establishment
of place of business in India.
- Filing fees ( Rs.5000/-)
- Compliance of special Act, If regulated
by special Act say Bank , NBFC,SEBI etc
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Reservation and Renewal of Name by Foreign LLP
-Foreign LLP/Foreign Company can reserve its existing
name by which it is registered in the Foreign Country.
- Form-25
- Filed with the fees of Rs.10,000/- Reservation of name valid for 3 years.
- Renewal of name by filing fresh From-25 on payment of
fees Rs.5,000/-.
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Compromise & Arrangement (Sec-60,61,62)
-Application
is to be made to Tribunal by LLP or creditor
or partners for compromise or arrangements.
-In case of under winding up, the application can be
made by the liquidator.
-Tribunal orders for meeting of creditors or partners for
decision/resolution by 3/4th in value of creditors or
partners agreeing to any compromise or arrangement.
-Tribunal may order sanctioning a compromise or an
arrangement.(Sec.61)
-Till the time tribunal is constituted application will be
made to High Court.
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Taxation and winding up
 S. 2 (23) of Income Tax Act, 1961 (IT Act) to include ‘LLP’
& its ‘Partners’
 Partner’s share of profit will be exempt [S.10 (2A) of IT
Act]
 Partner’s remuneration will be subject to newly proposed
limits
 DPs must verify & sign on Income Tax Returns. In
absence any partner.[S. 140 of IT Act]
 No Surcharge, Dividend Tax or MAT will be levied. .
 No Capital gain on conversion of partnership into LLP
 Winding up: Companies, LLP may be wound up
either Voluntary or by the Order of Tribunal
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Comparison between existing Business Forms and LLP Result
Category
Partnership
Company
LLP
Prevailing Law
‘The Indian
Partnership Act,
1932’
‘Companies Act,
1956’
‘The Limited Liability
Partnership Act, 2008’
Registration
Registration is
optional.
Registration with
ROC.
Registration with
Registrar of LLP.
Formalities of
Incorporation
Partnership Deed
filled with
Registrar of firms
with requisite fee
the MOA & AOA are
filled with ROC
with prescribed
fees
The LLP Agreement
are filed with the
Registrar with the
prescribed Fee.
Name of Entity
Any name as per
choice
Contain 'Ltd‘ or
'Pvt. Ltd‘ as case.
Name to contain 'LLP'
as suffix.
Legal
Proceedings
Only registered
partnership can
sue third party
A company is a
A LLP is a legal entity
legal entity can sue can sue and be sued
and be sued
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Category
Company
LLP
Distinct entity No
Yes
Yes
Creation
Created by
Contract
Created by Law
Created by Law
Cost of
Formation
Negligible Cost
Cost More for
Incorporation.
Formation of LLP is
Rs. 800/- means lower
cost
Charter
Document
Partnership Deed MOA/AOA
Foreign
Participation
Foreign Nationals Foreign Nationals can Foreign Nationals can
can’t form
be a member.
be a Partner.
Perpetual
Succession
No
Yes
Yes
Common Seal No
Yes
Depends
Remuneration Can pay
of Managerial remuneration to
Personnel
its partners
Can pay remuneration Depend upon LLP
to its Directors subject Agreement.
to law.
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Partnership
CA Bhansali Sudhir
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LLP Agreement
Category
Partnership
Rights / Duties / Partnership Deed.
obligation of
the Partners /
Directors
Company
LLP
AOA and resolution
passed by
shareholders or
directors.
Governed by LLP
Agreement.
Ownership of
Assets
Partners have joint Independent of the
ownership of all
members has
the assets belong ownership of assets
to firm
Number of
Members
Minimum 2 - 20
Tax Liability
Flat rate of 30%
Flat rate of 30% Plus
plus education
surcharge as
cess as applicable. applicable.
Flat rate of 30%
plus education
cess as applicable.
Digital
Signature
No
At least one
Designated Partner
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2 - 200 members in
Minimum 2 - no
case of Pvt. & Public limitation
Minimum 7 - no
limitation
At least one Director
9413801080
Independent of the
partners has
ownership of
assets
Category
Partnership
Company
Identification
Number
Not required to
Each director is
obtain any
required to have
identification number a DIN
Each Designated
Partners is required
to have a DIN
Dissolution
By Agreement/
mutual consent/ by
court order.
Voluntary or by
order of National
Company Law
Tribunal.
Voluntary or by
order of National
Company Law
Tribunal.
LLP
Admission as
As per the
partner / member partnership
Agreement
By buying shares As per the LLP
of a company.
Agreement
Liability of
Unlimited. Partners
Partners/Members are severally and
jointly liable for
actions of other
partners and the
firm.
Generally limited
to the amount
required to be
paid up on each
share.
CA Bhansali Sudhir
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Limited, to the
extent their
contribution, except
in case of
intentional fraud or
wrongful act by the
partner.
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Category
Partnership
Company
Statutory
Meetings
No provision in
BOD and General
regard to holding of Meetings are
any meeting
required to
conducted.
Maintenance No concept of any
of Minutes
minutes
BOD/ shareholders
meetings are
required to be
recorded in minutes.
Annual Filing No return is
Annual Financial
required to be filed Statement and
Annual Return is to
be filed with the ROC
every year.
Share
Certificate
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LLP
There is no provision in
regard to holding of any
meeting.
Agreement may decide
to record the
proceedings of
meetings of Partners
/Designated Partners
Annual Statement of
accounts and Solvency
& Annual Return is to be
filed with Registrar of
LLP every year.
Partnership Deed, if Share Certificates are The ownership
any.
proof of ownership of evidenced by LLP
shares held.
Agreement.
CA Bhansali Sudhir
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Category
Partnership
Company
LLP
Member / shareholder
can cease to be a
member by selling his
shares.
Can cease to be a
partner as per the LLP
Agreement or by giving
30 days prior notice.
Cessation as A person can
partner /
cease to be a
member
partner as per the
agreement.
Audit of
accounts
Tax audit of their
Required to get their
accounts as per
accounts audited
the Income Tax Act annually .
Voting
Rights
partnership
Agreement
Contracts
with
Partners/
Director
Partners are free to Restrictions on Board Partners are free to
enter into any
regarding some
enter into any contract.
contract.
specified contracts,
in which directors are
interested.
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If Turnover is Rs.40
Lacs or Rs.25 Lacs
contribution in any FY
are not required to get
their accounts audited.
Decided as per the
Voting rights shall be
number of shares
as decided as per the
held by the members. terms of LLP
Agreement.
Thank you…
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CA Bhansali Sudhir
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