THE LIMITED LIABILITY PARTNERSHIP an alternative vehicle

Ritesh Mittalmrriteshmittal@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

LLP

Body corporate

separate legal entity

perpetual succession.

Common Seal

Two or More Persons

Lawful Business

Profit Sharing Ratio

+

PARTNERSHIP ACT 1932

COMPANIES ACT 2013

LLP

Stringent Rules

High Cost

Unlimited Liability

Max Ceiling on Partners – 20

Only Individuals can be Partners

No Unique Name

-

Incorporation feesLLP VS COMPANY

LLPOther than small

Company

CapitalCapital

FeesStamp Duty

Other Forms Total

Capital Fees

Stamp Duty

Other 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 feesLLP VS COMPANY

LLP Small Company

CapitalCapital

FeesStamp Duty

Other Forms Total

Capital Fees

Stamp Duty

Other 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

INCORPORATION OF AN LLP

LIM

ITED

LIA

BILI

TY P

ARTN

ERSH

IP

NEW

INCO

RPO

RTIO

N

ROU

TECO

NVE

RSIO

N R

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PARTNERSHIP FIRM

PRIVATE LIMITED COMPANY

UNLISTED PUBLIC COMPANY

TWO AND MORE PARTNERS

SECOND SECHEDULE

THIRD SECHEDULE

FORTH SECHEDULE

EXISTING

CHAPTER IIICLAUSE 11 AND 12

CHAPTER XCLAUSE 55 AND 58

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 impactOn 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 8part 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 3late filing fees

RITESH MITTALmrriteshmittal@gmail.com

9885377421