NAME: DIKSHANT GOPALIA

CLASS: SYBMS (FINANCE)

ROLL NUMBER: 145

TOPIC: LIMITED LIABILITIY PARTNERSHIP

INDEX
 Introduction
 Features and governance
 Limited Liability Partnership Act
 Background and Nature of LLP
 LLP background in India
 Requirements while registering under LLP Act
 Steps to register an LLP
 Features of LLP
 Taxation of a Limited Liability Partnership\
 Relationship of Partners and list of forms and its uses
 Admission, Retirement and Death of partner(s)
 Benefits of LLP
 Partnership firm VS Limited Liability Partnership (LLP)
 Pvt. Ltd. Company VS Limited Liability Partnership
 Foreign LLP/ FDI in LLP
 Critical Analysis of LLP Act 2008
 Advantages and disadvantages of LLP
 Benefits of LLP on Small and Medium Enterprises (SMEs)
 Conversion of LLPs
 Dissolution of LLPs
 Total number of LLPs in India on different bases
 State/UT-wise number of LLPs companies
 About some companies that were converted into LLP
 Conclusion
 Bibliography
INTRODUCTION

Meaning:

A Limited Liability Partnership (LLP) is a type of partnership were liabilities of the partner
are
limited according to partnership deed or agreement between the partners. It exhibits elements
of both partnership and corporation. In this each partner is responsible or liable for their own
actions and other partners are not liable or responsible. In LLP all partners have limited to
their
share or to the percentage in profit sharing ratio similar to that of the shareholders of a
corporation. Unlike corporate shareholders, the partners have right to manage the business
directly. An LLP also contains a different level of tax liability from that of a Corporation.
ABOUT LLP:

Limited liability partnerships are different from limited partnerships in Some countries,
which may allow all LLP partners to have limited liability, while a limited partnership may
require at least one unlimited partner and allow others to assume the role of a passive and
limited liability investor. As a result, in different countries the LLP is more suited for
businesses in Which all investors wish to take an active role in management. In some
countries an LLP must have at least one partner known as a “general partner” who must have
unlimited liability for the company.

There is some difference between LLPs in U.S and those introduced in UK under
Limited Liability Partnerships Act 2000 and in India or in other Countries.
Features of Limited Liability Partnership

 Limited Liability of partners.

 Flexible form of organisation.

 Administration according to LLP agreement.

 Required to register with Registrar of companies.

 LLP agreement is the main incorporation document.

 The economic rights of partners are transferable.

 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 profit and losses equally.

 LLPs are not allowed to operate as not for profit organization.

Governance:
 By Limited Liabilities Partnership Act 2008

 By Registrar of Companies.

 By LLP Agreement between partners.

LIMITIED LIABILITY PARTNERSHIP ACT 2008
The Limited Liability Partnership Act 2008 was enacted by the Parliament of India to
introduce and legally sanction the concept of LLP in India. Unlike the general partnership in
India, LLP is a body corporate and have separate legal entity from its partners, have Perpetual
succession and any change in the partners of an LLP shall not affect the existence, rights or
liabilities of the LLP.
Section 4. Non-applicability of the Indian Partnership Act, 1932. The provisions
of the Indian Partnership Act 1932 (9 of 1932) shall not apply to a limited liability
partnership.
Limited Liability Partnership Act, 2008

Parliament of India

Citation No. 6 of 2009

Enacted by Parliament of India

Enacted 12 December 2008

Assented to 7 January 2009

Commenced 31 March 2009

Status: In force
Background and Nature of LLP

History of the LLP Act 2008:

The LLP structure in India is broadly based on the LLP statutes of U.K. and Singapore, albeit

modified to suit the Indian scenario. Whereas, the LLP structure in the U.S. is diametrically

different from that of India. Hence, a brief history regarding the legislation of U.S., U.K. and

Singapore will enhance the understanding the need for an LLP structure in India.

Singapore:

In Singapore, a Study Team on Limited Partnerships and LLPs was set up by the Ministry of
Finance in November 2002, to work out the details of the legal framework governing limited
partnerships and limited liability partnerships. The Singapore Limited Liability Partnership
Act, 2005 came into effect on April 11, 2005. By having a close look at the legislation, one
can conclude that the Singapore LLP Act is broadly modelled on the Delaware Revised
Uniform Partnership Act (the “Delaware Code”). An LLP is required at all times to have at

least two partners, with the exception that if an LLP is left with only one partner, the

remaining sole partner is given a grace period of up to two years to find a new partner. If the

LLP continues with less than two partners for more than two years, the remaining sole

partner assumes unlimited liability and is vulnerable to winding-up by the courts.

U.S.:

The idea for the LLP has been credited to “a twenty odd person law firm from Lubbock,”

Texas. The LLP was a direct outgrowth of the collapse of real estate and energy prices in the

late 1980s, and the concomitant disaster that befell Texas’s banks and savings and loan

associations. As a result, the first law on LLP came into existence in Texas, through the

enactment of Texas House Bill 278 on August 26, 1991. With the promulgation of the

Revised Uniform Partnership Act (‘RUPA’) in the US in 1994, a number of states permitted

the formation of LLPs, which was followed by the incorporation of comprehensive

provisions dealing with LLPs in the RUPA in 1997. After Texas passed its LLP legislation,

most other states quickly followed and today all 51 states have passed laws that permit the

formation of an LLP. Further, the National Conference of Commissioners on Uniform State

Laws adopted the Uniform Limited Liability Company Act in 1996 and revised it in 2006.

In the U.S., an LLP is considered as a special type of partnership that requires a special filing

with the State where the partners operate. This partnership form offers all partners the right to

participate in the management and the operation of a partnership without subjecting

themselves to unlimited personal liability as is the case in general partnerships.

U.K.:

In early 1997 the UK Department of Trade and Industry (“DTI”) circulated a consultation

paper and their investigation focused particularly, but not exclusively, on the joint and several

liability of professional defendants, seeking to ascertain whether there was an arguable case

for replacing joint and several liability by, for example, a system whereby each defendant
might be liable for only a proportionate share of the loss. Although the remit did not extend to

the question of joint and several liabilities within partnerships, the DTI took the opportunity

to consult on the distinct but related question whether to amend the law in Great Britain to

allow limited liability partnerships. This question was asked in the knowledge that the

concept of LLPs was well known in some overseas jurisdictions, particularly the USA.

The UK Limited Liability Partnerships Act 2000 came into force on 6 April 2001. The

legislation provides an LLP the organisational flexibility and taxation status of a partnership

along with limited liability for its partners.

The main distinction between the US Delaware LLP model and the UK LLP model is that

while the former regards the LLP as essentially a partnership, the latter primarily treats it as a

company. The existence of an LLP in the UK as a separate legal entity means that it has its

own rights and liabilities, distinct from those of its members. In the UK, an LLP differs

from a company to the extent that the former has greater organizational flexibility and is

taxed as a partnership. In the UK, LLPs are accorded ‘entity’ treatment whilst partnerships

governed by the provisions of the UK Partnership Act are generally treated as aggregates of

individuals.

India

The idea of the introduction of a limited liability partnership in India was floated as long ago

as 1957 to the Law Commission of India. However, the suggestion was not accepted by the

Commission at that time due to inherent shortcomings of the LLPs which might render the

provisions of the Companies Act, 1956 which were recently made stricter. However, it was
the Naresh Chandra Committee Report in 2003 that re-introduced the need to start LLPs in

the service industry, which, it described, in a legal perspective, as a hybrid between a

company and a partnership, but much closer to the private company form. This was soon

followed by the recommendations of the J.Z. Irani Expert Committee on Company Law in

2005 to enact a separate legislation for LLPs in India, and also to extend the scope of LLPs to

the small enterprises. As a result, on November 2, 2005, the Ministry of Company Affairs

introduced a concept paper on LLPs with a view to stimulating public debate over ideas,

which finally led to the promulgation of the proposed Limited Liability Partnership Bill,

2006. The Bill was introduced in the Rajya Sabha on 15th December, 2006 and referred to

the Standing Committee on Finance, which permitted the creation of a new type of corporate

entity, the limited LLP. The key features of the Bill are that it defines the characteristics of an

LLP, its method of incorporation, the rights and obligations of the LLP and its partners, and

lists penalties for infractions.

After being passed in the Upper House on October 24, 2008, the Bill was tabled in the Lok

Sabha, which also passed the Bill without any changes. On January 7, 2009, the LLP Bill

received the assent of the President and was thereafter notified in the Official Gazette in

2009, and the LLP Act was put into force by the Central Government on March 31, 2009.

The LLP Rules were made effective by the Central Government from April 1, 2009. The

Ministry of Corporate Affairs has also issued two notifications on July 5, 2011 and
November 4, 2011, thereby amending the LLP Rules.
LLP background in India

 The Abid Hussain Committee recommended legislation on LLP in1997.

 LLP found mention in the report of Naresh Chandra Committee (2003) set up on
regulation of private companies.

 The JJ Irani Expert committee on company law (2005) recommended introduction of

an LLP law.

 The Government introduced the Limited Liability Partnership Bill, 2006 in the Rajya
Sabha on 15 December 2006.

 It was later referred to the Department Related Parliamentary Standing Committee on

Finance.

 The present Bill, 2008 has been assented by President on 7th January 2009.

 LLP Act notified to be effective from 31 March 2009

Section 51,63-65,72,73 yet to be effective

Section 55-58 effective from 31 May 2009

Schedule II to IV effective from 31 May 2009

 LLP Rules notified to be effective from 1 April 2009

Rules 32,33,38-40 effective from 31 May 2009

 Website www.llp.gov.in
Requirements:

Partners: Minimum two partners are required and there is no maximum limit.

Capital: No limit on minimum and maximum capital contribution.

Names: At least two proposed names are required.

Objects: As per LLP Agreement.

Documents:
1. ID, Address proof and photo of all partners and DPs.

2. LLP Agreement duty stamp as per relevant stamp Act of the state.

3. Subscriber Statement.

4. Consent Letter from all the partners and DPs as per form 9

5. Proof of address of Registered Office.

Above mentioned detailed are required for Incorporation of LLP.

Steps need to follow to register an LLP.

1) Digital Signature Certificate (DSC)

2) Director Identification Number (DIN)

3) Reservation of Name.

4) Incorporation of LLP.

5) File Limited Liability Partnership Agreement.

6) Document of partners.

7) Document of LLP.
Features of Limited Liability Partnership Act

LLP Agreement:

Any written agreement between the partners of the LLP 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. It is not necessary to enter into an LLP agreement
as per LLP Act,2008. In the absence of LLP agreement, the mutual rights of
corporates, at least two individuals who are partners of such limited liability partnership
or nominees of such bodies corporate shall act as designated partners.

Accounts and Audit:

LLP is required to maintain books of accounts for each year on cash basis or on
accrual basis. Accounts shall be audited by Auditors appointed by the LLP. Audit of
accounts are compulsory if turnover exceeds Rs. 40 lakhs in any financial year or
contribution by partners exceed Rs. 25 lakhs.
The Statement of Accounts and Solvency for the year ended 31 March is
required to be filed with the Registrar before 30 October in each year.

Penalty:

Any person guilty of an offence under this Act for which no punishment is expressly
provided shall be liable to a fine which may extend to five lakh rupees but which shall
not be less than five thousand rupees and which may extend to fifty thousand rupees
for every day after the first day after which the default continues.
Taxation of a Limited Liability Partnership

LLP registered in India will be a resident even if only a part of control and management
is in India. Profits distributed by LLP exempt in the hands of the partners. As per the
Finance Bill 2009, the income of an LLP is taxed only the hands of LLP and not the
partners. The entire taxation of LLPs is similar to the existing taxation pattern
applicable to Partnerships registered and formed under The Indian Partnership Act
1932. Dividend distribution tax is not applicable in case of LLPs, whereas it is 15.00%
(plus, surcharge @ 5% plus education cess @ 2% plus SHEC @ 1% of amount so
declared, distributed or paid) in case of companies.

An LLP is taxed like a general partnership. The partnership reports business

income and expenses on a partnership tax return, and each partner in turn reports a
share of the profits or losses on his or her personal return. This is known as “pass
through" taxation because there are no corporate taxes or LLP taxes.
Income Tax Rate of LLP as applicable for the Assessment year 2020
– 2021:

LLP is liable to pay tax at the flat rate of 30% on its total income.
Surcharge: The amount of income-tax (as computed above) shall be further
increased by a surcharge at the rate of 10% of such tax, where total income exceeds
one crore rupees. However, the surcharge shall be subject to marginal relief (the total
amount payable as income-tax and surcharge shall not exceed total amount payable
as income-tax and surcharge shall not exceed total amount payable as income-tax on
total income of one crore rupees by more than the amount of income that exceeds one
crore rupees).

Health and education cess: The amount of income-tax and the applicable
surcharge, shall be further increased by education cess and secondary and higher
education cess calculated at the rate of four percent of such income-tax and
surcharge.

Alternate Minimum Taxation (AMT)

Initially, the concept of MAT, i.e. Minimum Alternative Tax, was introduced only for the
companies. However, gradually it was made applicable to all the other taxpayers in
the form of AMT, i.e. Alternate Minimum Taxation. Hence it forms a part of the LLP
taxation.
Relationship of partners:

 Governed by 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 l

 Equal Share in capital and 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.

List of forms and its uses:

Form DIN 1 Application for allotment of Director Identification Number.

Form DIN 4 Intimation of charge in particulars of Director to be given to the Central

Government.

Form 1 Application for reservation or change of name.

Form 2 Incorporation document and subscriber’s statement.

Form 2A Details in respect of designed partners and partners of LLP

Form 3 Information with regard to LLP Agreement and changes, if any

Form 4 Notice of appointment, cessation, change in name/ address/ designation of a

designated partner and consent to become a partner/ designated partner.
Form 5 Notice for change of name.

Form 8 Statement of Account and Solvency.

Form 11 Annual Return of Limited liability Partnership (LLP)

Form 12 Form for intimating other address for service of document.

Form 15 Notice for change of place of registered office.

Form 17 Application and statement for conversion of a firm into Limited Liability
Partnership (LLP)

Form 18 Application and statement for conversion of a private company/unlisted

public company into Limited Liability Partnership.

Form 22 Notice of intimation of order of court/ tribunal/ CLB/ Central Government to

the registrar.

Form 23 Application for direction to Limited Liability Partnership (LLP) to change its
name to the registrar.

Form 24 Application to the Registrar for striking off name.

Form 25 Application for reservation/ renewal of name by foreign Limited Liability

Partnership (FLLP) of Foreign Company.

Form 27 Form for registration of particulars by Foreign Limited Liability Partnership

(FLLP)
Form 28 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.

Form 29 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.

Form 31
Application for compounding of an offence under the Act.

Form 32 Form for filing addendum for rectification of defects or incompleteness.

Admission, Retirement and Death of partner(s)

1. Unless the LLP agreement says otherwise, the admission of a new member

requires the unanimous consent of the existing members.

2. An LLP agreement can provide mandatory retirement but it needs to be

objectively justified.

3. Existence of LLP Is not affected by admission, retirement or death of partner(s)

provided minimum number of partners are maintained.

Benefits of Limited Liability Partnership (LLP)

1) Minimum Two partners are required to form LLP.

2) Easy to establish LLP.

3) Limited Liability of partner.

4) Low formation cost.

5) No compulsory audit.

6) Tax benefits.
 Partnership firm VS Limited Liability Partnership (LLP)

Basis Partnership Firm LLP

Governing law Partnership Act, 1932 Limited Liability
Partnership Act 2008

Registration Not compulsory’ but is Compulsory

preferred

Creation By partnership By law

Agreement
Legal Status Partners collectively known LLP has separate legal status
as ‘Firm’, no separate legal apart from partners.
status.

Succession Firm would cease to exist on LLP would not be affected

change in partnership, unless on change in partnership
otherwise provided in (perpetual succession)
agreement.

Ownership of assets Partnership cannot own LLP can own assets in its
assets in its name, assets own name.
must be in name of the
partners.

Liability of Partners Unlimited Liability. Limited Liability.

Minor’s Position Minor can be admitted to Law silent on position of

benefits of partnership. Minors.
 Pvt. Ltd. Company VS Limited Liability Partnership

Basis Pvt. Ltd. Company LLP

Governing law Companies act 1956 Limited Liability
Partnership Act 2008

Name Must contain suffix ‘Ltd’ or ‘Pvt. Must contain suffix ‘LLP’
Ltd’

Common seal Common seal is compulsory. Common seal is optional.

Organizational Rigid and governed by Companies Flexible and Governed by

structure Act LLP Agreement.

Appointment of Specific Resolution required for Auditors shall be deemed to

Auditors appointment of auditors at every be re-appointed in case no
AGM. specific appointment is
made (unless otherwise
decided)

Audit All companies are subject to audit Only LLPs having turnover
of accounts. of more than Rs. 40 Lacs or
contribution of more than
Rs. 25 lacs are subject to
audit of accounts
Foreign LLP/ FDI in LLP

Foreign LLP
 Means 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 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.
Critical Analysis of LLP Act 2008

Key Issues

Taxation:

The act doesn’t specify how LLP will be taxed. The Private Limited companies are taxed

on their incomes and income, they distributed to their shareholders taxed again. The

Partnerships and Proprietorships are not taxed separately, it means income is distributed

to partners and taxed as Personal Income. In US and UK, LLPs are taxed like

partnerships.  

Capital Gains Tax:

If a Partnership or Proprietorship is converted into a Private Ltd. Company then transfer

of assets is not treated as capital gains (clause 47 (xiii) and (xiv) of Income Tax Act

1961). But nothing is specified in case of conversion from firm or partnership or company

to an LLP whether capital gain tax shall be waived or not.

Stamp Duty:

Also, bill doesn’t specify whether stamp duty shall be applicable or not on transfer of

property in case of conversion from company or partnership into LLP. In UK LLP act

2000, there is no stamp duty on transfer of property in process of conversion of a

partnership into LLP.

Number of Partners:

The clause 11(2) of the Companies Act (1956) specifies that no company or partnership

or association consisting of > 20 members shall be formed unless registered as a company

under this act. It is not clear whether this limit is applied to LLP or not.

Conversion from LLP:

If you are converted from a Partnership or a company into an LLP then after that there is

no U turn. It means no provision to convert back into partnership or company from LLP.

Concern of Lenders – While converting into LLP from Company or Partnership, the

concern of lenders are neglected as no consent of lenders or negotiations with lenders are

required while conversion.

One Person LLP:

The minimum number of members are two under this act to form LLP, so still we need a

provision to allow one-person company or one person LLP which already exists in many

countries.

Insurance:

There is no provision for minimum or compulsory insurance of LLP which undermine the
credibility of LLPs.

Consent of all Partners:

while introducing a new member, the consent of all existing partners is required. it means

unanimous decision is required but it seems impossible in case of larger LLPs.

The application of other laws not debarred and LLP act in addition of provisions of other

laws for time being in force. It can create confusion.

The Act states that all partners of LLP shall comprise of all partners of firm. But

if existing firm has partners other than Individual or body corporate and apply for

conversion, what will be the consequence as Section 5 of LLP act says that only

individual or body corporate can form LLP.

Advantages and Disadvantages of LLP

To choose a correct business vehicle, it needs a lot of potential as there are various
parameters

which are to be considered while doing so. Each form of business has its own place but for

most of the business owners, the choice is Limited Liability Partnership. It is mostly suitable

to accountants, lawyers, architects, consultants etc. A Limited Liability Partnership is a legal

person which is allowed to enter into a contract in its own name and act accordingly. Before

forming a limited liability partnership, one should consider the pros and cons. A limited

liability partnership has advantages as well as potential disadvantages.

Advantages of LLP:

Legal Status of Entity:

Limited Liability Partnership is a separate legal entity registered under the LLP Act,

2008. It can buy, rent, lease, own property, employ staff, enter into contracts, and be held

accountable if necessary to do so. The partners of an LLP are not personally liable for the

liabilities of the LLP.

Member(s) Liability:

The partners have limited liability and are liable only to the extent of their contribution to

the LLP. This concept of limited liability protects the assets of the members from the

liabilities of the business.

Annual Statutory Meetings:

It is not mandatory to conduct annual statutory meetings.

Decentralization:

An LLP has a decentralized management structure which makes it more convenient for a

business entity where all owners want the same management rights.

Flexibility:

Every partner in a limited liability partnership has the ability to decide how much they

want to contribute and how much of a partner they actually want to be in the business.
Level of members:

There are two types of partners in a limited liability partnership – designated members

and non-designated members. One can operate the LLP with different levels of

membership. 

Tax advantage:

An LLP allows its members to join and depart with no tax burden. The members of an

LLP are taxed directly as if they had earned their share of the LLP’s profits themselves.

Their tax is not related to the money withdrawn by them from the LLP. The LLP itself

pays no tax on its profits.

Disadvantages of LLP:

Inclusion of Indian Citizen as a Partner:

An NRI/Foreign national who wants to incorporate an LLP in India shall have at least
one

partner who is an Indian citizen. Two foreign partners cannot form an LLP without
having

one resident Indian partner along with them.

Transfer of Ownership:

If a partner wants to transfer his/her ownership rights then he/she has to obtain the
consent
of all the partners.

Filing of various returns:

Public disclosure is the main disadvantage of an LLP. An LLP must file Annual
Statement

of Accounts & Solvency and Annual Return with the Registrar each year. Income Tax

Return must also be filed to the Income tax department for the LLP.

Number of partners:

A limited liability partnership must have at least two members. If one member chooses to

leave the partnership, the LLP may have to be dissolved.

Non- recognition:

LLPs are limited by state regulations due to which they are not given due recognition in

every state as a business structure.

Huge penalties:

The cost of non-compliance of procedural matters such as late filing of e-forms is very
high

which would lead to huge sum of penalties owing to Rs.100 for every day till the time the

offence of late filing continues.

In the last couple of years, the businessmen mindset has undergone a paradigm shift and

people are looking up at Limited Liability Partnerships as a possibility for business

growth

and profitability.
Benefits of LLP on Small and Medium Enterprises (SMEs)

According to the JJ Irani Committee, LLPs are mostly suited partnership vehicle among

professional who are already regulated such as company secretaries, charted accountants, cost

accountants, lawyers, architect, engineers, doctors, etc. The Naresh Chandra Committee was

constituted to “suggest a scientific and rational regulatory environment, the hallmark of

which

is the quality, rather than the quantity, of regulation”. The recommendation of this Committee

is a step further to modernization and recognizing the needs of changing times and on the
basis

of these recommendations.

The LLP Act provides adequate breathing space to small and medium
enterprises

(SMEs), which till date have not been able to avail of the benefits of a corporate structure.
Not

only does the legislation provide benefits of corporate structure, it does away with the

limitations and problems of proprietorship and the regular partnership structure. Until 2008,

the SME sector largely worked through the regular partnership or proprietorship structures,

wherein the partners and sole proprietor, as the case may be, were personally liable for all

liabilities of the business vehicle.

 However, the LLP Act provided the required breather to SMEs to convert their

business vehicles to an LLP, whereby the liability of business vehicle could not be tagged and

made personal liability of partners constituting it.

While small and medium companies have been given special protection under the

Industrial Policy of 1948, wherein banks and financial institutions are required to give loans

(lesser in amount) to the sector on a priority basis, it has been difficult for them to raise funds.

However, by forming an LLP, it might become easier for SMEs to get loans as security
creation

will get easier. This is because an LLP would be a separate entity altogether than the partners

who constitute it. Banks and financial institutions will be able to enforce the securities
created

while granting the loans specifically as the LLP can be sued being a separate legal entity.

As SMEs have limited capital, their main focus is to keep the running cost at the bare

minimum. The major chunk of these costs are relating to accounting and compliance

requirements which are very less when it comes to LLP. The LLP model benefits the SMEs

in many other ways, which are as follows.

No Minimum Capital Contribution Required

LLP could be formed without any minimum capital contribution as opposed to the
Private Limited companies’ requirement of Rs. 1 Lac. Even the contributions could be made
in Instalments which makes the small Entrepreneurs/Start-ups avail these benefits and forge
ahead. For instance, that the partners can bring minimum capital say Rs. 5000 /Rs. 10000/Rs.
20000/- because there is no restriction provided under the LLP Act to bring a minimum
capital contribution at the time of incorporation.
Liability is Limited
The liability of each partner is limited to the extent of his/her contribution/share as opposed to

the sole proprietorship or the traditional partnership firm where the personal assets of the

proprietor or partners could be at risk in the event of a failure of the business. Thus, this mode

helps the partners to be free from personal liabilities or becoming bankrupt (except in cases of

fraud by any partner). It’s quite safe compared to the unlimited liability which offered by

partnership firm.

Separate legal Entity

LLP has its separate existence from its partners. LLP can sue and be sued in its own

existence. Due to its status, the entry and exit of the partners don’t affect the LLP. As it

incorporates various stakeholders (i.e. Suppliers, Customers etc.), it offers the flexibility

while dealing & signing legal contracts and in many other things.

Economics and Working

Statutory filing fees as well as the cost of formation is less compared to forming a Private
limited company. Apart from stamp duty for executing LLP agreement the registration fees
are less than required for incorporation for a private Limited company.
Partners are not subjected to hold 4 mandatory board meetings as required in

once in a year by Companies Act. The partners can meet as per their convenience or need

basis. Partners can specify about the meetings details & schedule in the LLP agreement.
Conversion of LLP

1) Conversion of Existing Firms, Companies to LLP:

Conversion of a firm, Private Limited Company, unlisted public company to an LLP is

governed by the Second, Third and Fourth Schedule of the LLP Act respectively.

Clause 3 of Schedule III and IV states that a private company/ unlisted public company

may convert itself to LLP if and only if:

 There is no security interest in its assets subsisting or in force at the time of

application.

 The partners of the LLP shall comprise only of the shareholders of the Company.

Conversion of a general partnership firm into an LLP is tax-neutral if the rights and
obligations

of the partners remain the same after conversion and if there is no transfer of any asset or

liability after conversion and that of a private limited company subject to certain condition

which, among other things, includes a condition that the company’s gross receipts/ turnover
in

any of the last 3 years did not exceed Rs. 60 lakhs, the value of total assets in the books of

account in any of the last 3 years did not exceed Rs. 5 crores.
 2) Conversion of LLP to Company:

Conversion of an LLP is not provided under the LLP Act. However, enabling provisions are
provided in the companies Act, 2013 under section 366 to 374 which talks about companies
capable of being registered and includes any:

 Partnership firm

 Limited Liability Partnership

 Cooperative society

 Society or any other business entity formed under any other law for the time being in

force which talks about companies capable of being registration under Part I of
chapter

XXI of the companies Act, 2013.

As per sub-section (2) of section 366 of the companies Act, an LLP must have at least seven
members to convert itself into a company.
 Dissolution of a Limited Liability Partnership (LLP)

An LLP gets dissolved in the following circumstances:

1. Death or Bankruptcy of one or more partners

2. By Order of Court / compulsory judicial decision

3. Expiry of term

4. Discontinuation of Partnership

5. Attainment of object

The basic step for the dissolution of a Limited Liability Partnership

(LLP) consists of three key stages:

1. Adoption and submission of a dissolution resolution

2. Liquidation

3. Deletion of the company from the Commercial Register

 When an LLP is formed, it is formed by signing a partnership agreement between them,

the terms of conditions of LLP consists of clause called termination clause or dissolution

clause which states the procedure to be followed to dissolve the LLP, the process of dissolving

LLP depends on the dissolution provisions enumerated in the partnership agreement and the

partnership laws applicable to the state where the business is registered. Usually, the

partnership agreement sets certain dissolution rules, that may include how to do voting and

how the voting rights are to executed and related rules and regulations which governs the

decision to dissolve the partnership.

Step 1: Notice

The very first step is to call a meeting of the partners by issuing a notice to all the partners as

stipulated in the partnership agreement. Usually the in-partnership agreement the notice

requires at least 30 days of time period. Notice is to be served should be in writing to the

partners o held the partners meeting. In accordance with the partnership agreement, the notice

is required to be sent along with the agenda.

Step 2: Voting

Vote to dissolve the partnership is to be conducted and usually, it’s is decided by majority

vote, whereby if the majority agrees to dissolve then the LLP is dissolved unless the general

partnership agreement establishes a predetermined date for dissolution. The manner of voting

could be show hand, or by direct asking or as per the provisions of the agreement. Thereafter

the votes are recorded in the meeting minutes, the records of the meeting are thereafter

recorded and filed.

Step 3: Appointment of the agency to conduct Liquidation

The LLP itself appoints one or more general partners to wind up the partnership’s business

otherwise the partners hire an outside agency to carry on the business affairs. In case the

partners cannot reach to unanimous decision to appoint an outside agency, in such scenario the

LLP can ask the court to supervise liquidation or hire a liquidation trustee.

Step 4: Certificate of cancellation

The certificate of cancellation is to be filed with the state business registrar. The certificate of

cancellation is to be filed with the same state office where the partnership’s certificate of

limited partnership was obtained. The certificate of cancellation shall contain the following

information:
1. The name of the partnership,

2. The date the certificate of limited partnership was filed, and

3. The effective date of cancellation.

The form can be downloaded to prepare the certificate from the secretary of state’s website or

the comparable state agency which is authorized to deal the business registrations. Thereafter

the appropriate registration fees are required to be paid.

Step 5: Settlement of Liabilities

The LLP is required to settle out all the partnership’s outstanding obligations such as given

below:

1. Tax bills if the partnership owes state sales or

2. Employment taxes.

3. Pay all existing creditors and

4. Set aside money to cover any contingent liabilities, let’s say ongoing payment disputes

The partners are required to liquidate the LLP’s assets. Basically, the partners

primarily responsibility for dissolution are involved in this.

Step 6: Pay-out outstanding left after settlement of assets

At the time of formation of the Partnership firm, the partners must have put in some capital

or contribution to the LLP. Hence after completing the liquidation and paying out the

liabilities the leftover of the company asset is required to be returned in the ratio of the

contribution made by the partners. If the remaining assets cannot cover all of the partners’

contributions, distribute the available money proportionally.

Step 7: Closure

1. For full and final Closure all partnership accounts are required to close.

2. All the business registrations should be closed.

3. Inform all the clients, customers and vendors of the dissolution of the LLP.

Step 8

File the Complete final tax forms for the LLP and give final K-1s to partners.
Total number of Limited Liability Partnership Registered till
2018

Total Number of LLPs Registered and Total Obligation of

Contribution as on 30.06.2018
Financial Year Total Number of Per cent growth Total Obligation Per cent growth
(April to March) LLP Registered over previous year of Contribution over previous
(Rs. in. Crore) year

2009-10 1,055 – 596.55 –

2010-11 3,261 209 2758.37 462.39

2011-12 4,319 32 3049.73 110.56

2012-13 5,167 20 1854.50 -60.81

2013-14 7,982 54 2029.56 109.44

2014-15 14,682 84 2650.05 130.57

2015-16 22,505 49 8872.33 334.80

2016-17 29,407 34 8,420.63 94.91

2017-18 32,934 22 5,545.15 65.85

2018-19 *(Upto 5,421 – 2,670.34 –

30.06.2018)

TOTAL 1,26,733 38,447.21

Source: Ministry of Corporate Affairs, Monthly Information Bulletin on Corporate Sector

During the financial year from 2009-10 totally 1,055 LLPs registered, followed by

next financial year 2010-11 totally 3,261 LLPs have been registered, compared to the

previous year's figure of more than two times were increased for the corresponding period.

During the all financial years, year 2011-12 (32per cent), 2012-13 (20 per cent), 2013-14 (54

per cent), 2014-15 (84 per cent), 2015-16 (49 per cent), 2016-17 (34 per cent) and 2017-18

(22 per cent) are showed percentage of growth over previous year are in positive growing

trend. Chart 1 depicts the number of LLPs registered during the 2009-10 to 30.06.2018. Total

obligation (Rs. in crore) from 01.04.2009 to 30.06.2018 shows as increasing trend except in

the 2012-13 indicates at negative growth.

 Number of LLPs Registered Month-Wise 2013-14 to 2017-18
2013-14 2014-15 2015-16 2016-17 2017
-18
April 666 562 1,666 1,612 2,576
May 662 531 2,026 2,733 2,723
June 565 825 2,276 2,778 2,720
July 679 1,131 1,949 2,335 3,332
August 531 1,171 1,836 2,328 2,870
September 524 1,235 1,753 2,367 2,675
October 586 963 1,233 2,009 2,692
November 493 1,244 1,704 1,971 2,724
December 722 1,399 1,545 2,308 2,870
January 792 1,526 1,570 2,736 3,269
February 865 1,761 2,154 2,712 2,464
March 897 2,334 2,793 3,518 2,019
Total 7,982 14,682 22,505 29,407 32,9
34
Source: Ministry of Corporate Affairs, Monthly Information Bulletin on Corporate Sector

Table 2 and Chart 2 give a pictorial representation of the total number of LLPs registered
during the month-wise 2013-14 to 2017-18. It clearly explains the up and downs of
registrations in month-wise LLPs during the study period. During the year 2013-14 totally
7,982 LLP firms registered, followed by 201415 totally 14, 682 LLP firms registered, during
the year 2015-16 totally 22,505 LLP firms registered, 2016-17 totally 29,407 LLP firms
registered and during the year 2017-18 totally 32,934LLP firms registered.

Chart 2
Number of LLPs Registered last financial Year Month-Wise
2013-14 to 2017-18

Sector – wise Active Number of LLPs

Chart 3
Sector wise Active LLPs

Table 3 and Chart 3 show that sector wise classification of active LLPs as on 30th June 2018. It

indicates service sector account for 87,659 LLPs, followed by Industry and Agriculture sectors

accounting for 24,887 and 2,147 respectively. Chart 3 also show that 76 per cent active number of

LLPs in the service sectors followed by industry sector 22 per cent and agriculture and allied sectors 2

per cent. Sector wise obligation of contribution (in Rs lakh) of active LLPs as on 30thJune 2018

reveals that service sector have an account for obligation of contribution (in Rs. lakh) 4,137,591.79,

followed by industry and agriculture sectors accounting for obligation of contribution (in Rs

lakh)1,646,657.60and obligation of contribution (in Rs lakh) 87,727.27. It explains that obligation of

contribution (in Rs. lakh) 71 per cent in the service sectors, followed by industry sector 28 per cent

and agriculture and allied sectors 1 per cent.

Table 3
Sector-Wise Active Number of LLPs
(As on 30th June, 2018)
Sl. Sectors Number Per cent Obligation of Per cent
No. Contribution (in Rs Lakh)

I Agriculture 2,147 2 87,727.27 1

II Industry 24,887 22 1,646,657.60 2
8
III Services 87,659 76 4,137,591.79 7
1
IV Others 1 0 10 0
Total 114,694 100 5,871,986.66 100
 Table 4
Economic Activity-wise Active LLPs
(As on 30th June, 2018)
Sl. Economic Activity Number Per cent Obligation of Per
cent
No. Contribution (in Rs Lakh)

1 Business Services 47,285 41 1,391,056.01 24

2 Trading 14,320 12 972,344.60 17

3 Manufacturing 13,496 11 897,223.08 15
4 Real Estate 11,571 10 837,341.11 14
5 Construction 10,052 9 587,977.38 10
6 Community 10,067 9 523,433.62 9
7 Agriculture 2,147 2 312,400.41 5
8 Transport 2,456 2 195,507.83 3
9 Finance 1,733 2 87,727.27 1
10 Mining & Quarrying 689 1 30,493.06 1
11 Electricity & Gas 650 1 33,085.87 1
12 Insurance 227 0 3,386.43 0
13 Others 1 0 10 0

Total 1,14,694 100 5,871,986.66 100

Source: Monthly Information Bulletin on Corporate Sector, June 2018

The above Table 4 shows that economic-activity wise classification of active LLPs as on 30th
June 2018 further exhibits that large number of LLPs are in business services sector 47,285
followed by trading sector14,320, manufacturing sector 13,496, real estate and renting sector
11,571, construction sector 10,052, community, personal and social services sector10,067,
transport, storage and communications sector 2,456 agriculture and allied activities sector
2,147, finance sector 1,733, mining and quarrying sector 689, electricity, gas and water
companies sector 650, insurance sector 227 and others sectors.
Table 4 also gives the economic-activity wise classification obligation of
contribution (in Rs lakh) of active LLPs as on 30th June 2018. It also explains that large
amount of LLPs obligation of contribution (in Rs lakh) are in business services sector
1,391,056.01 followed by trading sector 972,344.60, manufacturing sector 897,223.08, real
estate and renting sector 837,341.11, construction sector 587,977.38, community, personal
and social services sector 523,433.62, agriculture and allied activities sector
312,400.41, transport, storage and communications sector 195,507.83, finance sector
87,727.27, mining and quarrying sector 30,493.06, electricity, gas and water companies
sector 33,085.87, insurance sector 3,386.43 and others sectors 10.
 Table 5
Obligation of Contribution wise Active LLPs

(As on 30th June, 2018)

Sl. Obligation of Contribution Number Active Obligation of Contribution
No Range LLPs (in Rs Lakh)
.
Number per cent (in Rs Lakh) per
cent
1 Up to 1 lakh 26,804 23.37 8,980.19 0.15
2 Above 1 lakh to 5 lakhs 67,351 58.72 99,519.05 1.69
3 Above 5 lakhs to 10 lakhs 7,034 6.13 64,815.29 1.1
4 Above 10 lakhs to 25 lakhs 4,276 3.73 78,879.85 1.34
5 Above 25 lakhs to 50 lakhs 3,094 2.7 126,165.69 2.15
6 Above 50 lakhs to 1 crore 2,486 2.17 210,766.87 3.59
7 Above 1 crore to 2 crores 1,256 1.1 194,447.01 3.31
8 Above 2 crores to 5 crores 1,226 1.07 426,601.23 7.27
9 Above 5 crores to 10 crores 512 0.45 391,735.26 6.67
10 Above 10 crores to 25 crores 390 0.34 625,277.55 10.65
11 Above 25 crores to 100 crores 213 0.19 1,071,227.11 18.24
12 Above 100 crores 52 0.05 2,573,571.56 43.83
Total 114,694 100 5,871,986.66 100
Source: Monthly Information Bulletin on Corporate Sector, June 2018

Table 5 elucidates that Obligation of Contribution wise Active LLPs as on 30th June,

2018.These also detailed total numbers of 114,694 LLPs were active in the country. About

58.72 per cent active LLPs (67,351 in number) have obligation of contribution above 1 lakh

to 5 lakhs, followed by (26,804) up to 1 lakh. It indicates that 82.09 per cent active LLPs

(94,155 in numbers) have obligation of contribution less than or equal to Rs. 5 lakh each. In

case of obligation of contribution above 5 lakhs to 50 lakhs shows that 12.56 per cent active

LLPs (14,404 in numbers); and only about 3.20 per cent (3,649 in number) of LLPs have

obligation of contribution above Rs.1 crore each.

State/UT-wise number of LLPs companies
S.no State/UT 2014-15 2015-16 2016-17
1 Andaman & Nicobar 1 1 1
2 Andhra Pradesh 155 233 297
3 Arunachal Pradesh 1 2 3
4 Assam 28 65 126
5 Bihar 96 159 254
6 Chandigarh 70 106 141
7 Chhattisgarh 47 66 91
8 Daman & Diu 2 6 5
9 Delhi 1837 3546 4127
10 Dadra and Nagar Haveli 5 14 7
11 Goa 37 75 116
12 Gujarat 974 1723 2443
13 Himachal Pradesh 13 24 52
14 Haryana 345 627 885
15 Jharkhand 47 109 155
16 Jammu & Kashmir 18 17 17
17 Karnataka 1230 1755 2193
18 Kerala 403 633 765
19 Maharashtra 5321 7549 9861
20 Meghalaya 2 7 6
21 Manipur 3 8 8
22 Madhya Pradesh 204 414 522
23 Mizoram 0 1 0
24 Nagaland 0 1 1
25 Orissa 45 98 112
26 Punjab 105 203 292
27 Pondicherry 5 12 15
28 Rajasthan 723 959 1006
29 Sikkim 2 2 4
30 Telangana 358 780 1193
31 Tamil Nadu 662 844 1116
32 Tripura 2 0 3
33 Uttar Pradesh 705 1055 1432
34 Uttarakhand 44 62 139
35 West Bengal 1359 1778 2332
Grand total 14849 22934 29723

This was stated by Shri P.P. Chaudhary, Minister of State for Corporate Affairs in written
reply to a question in Lok Sabha today.

Some Limited Liability Partnership companies

1. WOW INVESTMENT SOLUTIONS PRIVATE LIMITED:
Wow Investment Solutions Private Limited is a Private incorporated on 20 March 2017. It is
classified as Non-govt company and is registered at Registrar of Companies, Mumbai. Its
authorized share capital is Rs. 100,000 and its paid-up capital is Rs. 100,000. It is involved in
Activities auxiliary to insurance and pension funding [This class includes activities involved
in or closely related to the management of insurance and pension funding other than financial
intermediation and includes activities of insurance agents, average and loss adjusters,
actuaries and salvage administrators. (Marine salvage is classified in class 6303)].

Wow Investment Solutions Private Limited's Annual General Meeting (AGM) was last
held on 31 March 2017 and as per records from Ministry of Corporate Affairs (MCA), its
balance sheet was last filed on 31 March 2017

2. MANTECH COUNTING AND SYSTEMS PRIVATE LIMITED

Mantech Counting and Systems Private Limited is a Private incorporated on 23 April 1990. It

is classified as Non-govt company and is registered at Registrar of Companies, Mumbai. Its

authorized share capital is Rs. 4,000,000 and its paid-up capital is Rs. 376,300. It is involved
in

Manufacture of office, accounting and computing machinery.

Mantech Counting and Systems Private Limited's Annual General Meeting (AGM) was last

held on 29 September 2015 and as per records from Ministry of Corporate Affairs (MCA), its

balance sheet was last filed on 31 March 2015.

Directors of Mantech Counting and Systems Private Limited are Maneesh Ramakant Sapte

and Vinay Ramakant Sapte.

 3. VALUE INFORMATION TECHNOLOGIES LIMITED

Value Information Technologies Limited is a Public incorporated on 07 March 1996. It is

classified as Non-govt company and is registered at Registrar of Companies, Mumbai. Its
authorized share capital is Rs. 3,000,000 and its paid-up capital is Rs. 3,000,000. It is
involved in Manufacture of office, accounting and computing machinery

Value Information Technologies Limited's Annual General Meeting (AGM) was last held on
30 September 2016 and as per records from Ministry of Corporate Affairs (MCA), its balance
sheet was last filed on 31 March 2016.

4. SONO PRESS (INDIA) PRIVATE LIMITED

Sono Press (India) Private Limited is a Private incorporated on 15 April 1998. It is classified
as Non-govt company and is registered at Registrar of Companies, Mumbai. Its authorized
share capital is Rs. 500,000 and its paid-up capital is Rs. 100,000. It is involved in
Manufacture of office, accounting and computing machinery.

Sono Press (India) Private Limited's Annual General Meeting (AGM) was last held on 12
July 2016 and as per records from Ministry of Corporate Affairs (MCA), its balance sheet
was last filed on 31 March 2016.

5. TRIUMPH INFORMATION TECHNOLOGY LTD

Triumph Information Technology Ltd is a Public incorporated on 12 October 1992. It is

classified as Non-govt company and is registered at Registrar of Companies, Chennai. Its
authorized share capital is Rs. 10,000,000 and its paid-up capital is Rs. 6,000,000. It is
involved in Manufacture of office, accounting and computing machinery

Triumph Information Technology Ltd Annual General Meeting (AGM) was last held on 28
September 2015 and as per records from Ministry of Corporate Affairs (MCA), its balance
sheet was last filed on 31 March 2015.

Directors of Triumph Information Technology Ltd are Krishnamurthy Cadavasal Sridhar,

Avinash Vijay, Sridhar Sujatha and Jayaraman Vijay.
 6. BLACKGOLD MEDIA ENTERTAINMENT PRIVATE LIMITED
Black gold Media Entertainment Private Limited is a Private incorporated on 25 May 2009. It

is classified as Non-govt company and is registered at Registrar of Companies, Mumbai. Its

authorized share capital is Rs. 100,000 and its paid-up capital is Rs. 100,000. It is involved in

Manufacture of other electrical equipment.

Blackgold Media Entertainment Private Limited's Annual General Meeting (AGM) was last

held on 27 September 2012 and as per records from Ministry of Corporate Affairs (MCA), its

balance sheet was last filed on 31 March 2012.

Directors of Blackgold Media Entertainment Private Limited are Manoj Tulshiram Yelve,

Harish Kamlakar Patil.

7. AKSHITA PAPERS PRIVATE LIMITED

Akshita Papers Private Limited is a Private incorporated on 05 August 1994. It is classified as
Non-govt company and is registered at Registrar of Companies, Mumbai. Its authorized share
of paper and paper product.

Akshita Papers Private Limited's Annual General Meeting (AGM) was last held on 29
September 2018 and as per records from Ministry of Corporate Affairs (MCA), its balance
sheet was last filed on 31 March 2018.
Conclusion

With the introduction of LLP, Entrepreneurs will have more to choose from to start a firm or
can convert whenever they want. They can choose the preferred form of business they want
or suitable for them to do business. Flexible nature of LLP will facilitate entrepreneurs,
venture capitalists and professionals to organize and operate in an innovative and efficient
manner for effectively competing in the global market. Basically, the hybrid structure of an
LLP, which combined with the organisational flexibility of general partnership and the
Limited Liability benefits of an incorporated company is innovative, appealing and is likely
to attract small and medium size entrepreneurs, service providers and professionals into
setting up LLPs in India. The structure is also likely to improve the efficiency of India
enterprises and facilitate an increased participation of the Indian service industry in the global
market. Even the issues that arise are not irresolvable.

The LLP Act is no doubt, a step in the positive direction towards the better future
for the small and medium businesses. In view of the growth of Indian Service industry in
recent times, LLPs would further contribute to the growth of the service industry and a large
number of existing companies, public as well as private, are expected to convert into LLPs
with a view to have access to the benefits of the LLP. The Government of India has made an
endeavour to create a facilitating environment for entrepreneurs, service providers and
professionals to meet the global competition; however, it needs to be seen how far the change
is useful.
 Bibliography

1. Wikipedia.com
2. Slide share.in
3. Zauba corp.com
4. Mca.gov.in
5. Economics times
6. Pib.gov.in
7. Legalwize.com
8. Business today.in
9. Researchgate.net