Analysis on

Limited Liability Partnership

CA.V.M.V.Subba Rao
Chartered Accountant
International Scenario

 Limited Liability Partnership has been

prevalent in many countries including
 USA - Year - 1990
 UK - Year - 2000
 JAPAN - Year - 2006
 SINGAPORE – Year – 2006

 Our LLP model is based on UK /Singapore

Journey of LLP in India

 In the year 1997 Abid Hussain Committee

recommended Legislation of LLP in India
 In the year 2003 Naresh Chandra Committee
prepared a Report on LLP
 On 15th December,2006 the LLP Bill,2006
was introduced in Rajya Sabha by MCA
 On 27th December,2007 Parliamentary
Standing Committee submitted a Report to
Lok Sabha & Rajya Sabha
Journey of LLP in India (Contn.)

 On 21st October,2008 the Revised LLP

Bill,2008 was introduced in Rajya Sabha
 On 24th October,2008 the LLP Bill,2008 has
been passed by Rajya Sabha
 The LLP Bill,2008 will now placed for
approval of Lok Sabha in December,2008
and may, hopefully, be passed before the
end of the current year.
The Limited Liability Partnership
Bill,2008
Constitutional Background  The LLP Bill,2008
consists of :
The Central Government has  14 Chapters
exclusive power to make
Limited Liability Partnership Act  81 Sections
under Entry 44 of List I of the  04 Schedules
Union List
 The LLP Rules &
Forms consists of:
 16 Chapters
 40 Rules
 29 Forms
 03 Annexures
Basic Features of LLP

 LLP is a Body Corporate having perpetual

succession.
 LLP is a legal entity separate from its
partners.
 Any Change in partners of a LLP shall not
affect the existence, rights or liabilities of the
LLP.
 No partner is personally liable to liabilities of
the LLP
Basic Features of LLP
 Liability of LLP is not liability of individual partners.
 LLP must have at least two partners
 No maximum Limit of partners
 Any Individual or Body Corporate may be a partner
in LLP.
 Partner is an agent of LLP but not of other partner.
 Ministry of Corporate Affairs is administrating
Authority
Basic Features of LLP
 The Provisions of Indian Partnership
Act,1932 shall not apply to a LLP.
 The Provisions of Companies Act,1956 can
be made applicable with suitable modification
by issuing a notification to LLP
 If the number of partners fall below two, the
surviving partner will have to admit at least
one more partner within 6 months. If he does
not do so, his liability will become unlimited
and LLP will be wound up.
Designated Partners

* Every LLP shall have two (2)

Designated Partners.
* At least one of such designated partner
shall be resident individual..
* Every Designated Partner shall obtain
DPIN / DIN from MCA.
Incorporation Document - Form 2
 Name of LLP  Similar to MOA
 Proposed Business  No provision to amend
 Address of Regd. Office Incorporation
 Names and addresses Document
of  Provision to Change
 Partners Name, Business &
 Designated Partners Registered Office
 Any other information  Certificate of
prescribed Incorporation by ROC
is conclusive evidence
Liabilities of Designated Partners

 Responsible for compliance of the provisions

of the LLP Act including filing of various
returns and documents specified in the Act.

 Liable to all penalties imposed on the LLP for

any contravention of those provisions.
L L P Agreement - Form 4
 Limited Liability Partnership Agreement
means any written agreement between the
partners of the LLP or between the LLP and
its partners and its partners which determines
the mutual rights and duties in relation to that
LLP.
 After incorporation, the LLP may have the
LLP agreement.
 The LLP agreement is similar to A O A of
Company.
L L P Agreement

 In the absence of any LLP agreement the

provisions set-out in FIRST SCHEDULE is
applicable.
 If the partnership agreement is executed
before registration of LLP the partners will
have to ratify this agreement after
incorporation of LLP and file with ROC
Clauses in FIRST SCHEDULE
 All partners entitled to share equally in the Capital
and Profits/losses.
 Indemnity Clause
 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 referred to Arbitration Act
Contribution
 Contribution of Partner is similar to Share
Capital of a Company.
 Contribution may be Tangible or Intangible.
 Contribution of partner consisting of Tangible
or Intangible or Other Benefits shall be
valued by the Practicing Chartered
Accountant or Cost Accountant or approved
valuer from the panel.
 Nature and amount of Contribution should be
disclosed in accounts
Designated Partners and their role

 The ‘designated partner’ has no implied

authority to conduct day to day business of
LLP.
 It is not essential that power to conduct
business should be with designated partner.
 Appoint any partner as “Managing Partner” or
“Executive Partner” to manage the day to day
affairs of LLP
Accounts and Audit
 Statement of Account &  A LLP shall be exempt from
Solvency the audit of its accounts if
 Form 8 its turnover does not
 To be filed with ROC within exceed, in any financial
6 months from close of year, Rs.40 Lakhs; or its
financial year contribution does not
exceed Rs.25 Lakhs.
 Annual Return
 Form 11
 To be filed with ROC within  Such audit shall be carried
60 days. by a Chartered Accountant
in practice.
 Annual Return to be
certified by Company
Secretary Only  Required to keep all recrods
for 8 years.
Accounts and Audit
 Financial Year means the period from April 1 of a
year to the March 31 of following year.
 All Accounts, Details and documents are available
for public Inspection.
 Very heavy fines for delay in filing of Returns –
Minimum Rs.25,000/- /Maximum –Rs.5 lacs
 Offenses compoundable.
 Heavy Fees for late filing of documents- Rs.100 per
day.
 Late filing up to 300 days is permissible
Other Provisions

 Compromise, arrangements or reconstruction

of LLP
 Winding up and dissolution of LLP
 Strike off defunct LLP
 Liability of partner by holding out.
 Whistle Blowing
 Assignment and transfer of partnership rights.
Other Provisions

 Investigation of affairs of LLP

 Every LLP shall have either the words
“Limited Liability Partnership” or the acronym
“LLP” as the last words of its name.
 Application of Name availability.
 Minor can be admitted to the benefits of LLP
 E-filing of documents.
 Inspection of documents filed ROC
SECOND SCHEDULE

It Contains provisions for Conversion of

existing Partnership Firm into Limited
Liability Partnership.
THIRD SCHEDULE

It Contains provisions for Conversion of

existing Private Company into Limited
Liability Partnership
FOURTH SCHEDULE

It Contains provisions for Conversion of

existing Unlisted Public Company Firm
into Limited Liability Partnership
TAXATION OF LLP
 LLP Act is silent regarding taxation of LLP
under the Income-tax Act.
 A separate Chapter is required under
income-tax on taxation of LLP
 Pass-through Concept:
 Share of each partner should be taxed in the
hands of individual partners (as was the provision
in case of partnership up to 1993).
 Let us wait and see how LLP and individual
partners are made liable to income-tax
THANK YOU

CA. V.M.V.SUBBA RAO

CHARTERED ACCOUNTANT