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LIMITED LIABILITY PARTENERSHIP

LIMITED LIABILITY PARTENERSHIP. A NEW CORPORATE FORM UNDER THE LIMITED LIABILITY PARTERNERSHIP ACT-2008 (Effective from7 th January 2009) CA. Vijay R Kalani M.Com, ACA, LCS, ICWAI (Final). Limited Liability Partnership.

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LIMITED LIABILITY PARTENERSHIP

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  1. LIMITED LIABILITY PARTENERSHIP A NEW CORPORATE FORM UNDER THE LIMITED LIABILITY PARTERNERSHIP ACT-2008 (Effective from7th January 2009) CA. Vijay R Kalani M.Com, ACA, LCS, ICWAI (Final) CA. Vijay R Kalani

  2. Limited Liability Partnership • Governing law : Limited Liability Partnership Act, 2008 and various rules made there under. • Registration : Compulsory. • Creation : Created by law. CA. Vijay R Kalani

  3. Nature of Limited Liability Partnership • A body corporate formed and incorporated under the LLP Act,2008. • A legal entity separate from its partner. • It will have perpetual succession. • Any change in the partners of a LLP shall not effect its existence, right, or liabilities. • LLP can also purchase movable/immovable property in it’s own name. • Save as otherwise provided, the provision of Indian Partnership Act 1932, will not be applicable to a LLP. • Liability of the every partner limited except in case of fraud. • It have hybrid characteristics of company & firm. • No maximum limit of the partners. CA. Vijay R Kalani

  4. Why is LLP required to business community • It is a new corporate form that enable professional expertise and entrepreneurial initiative to combine, organize and operate in an innovative and efficient manner. • It provides flexibility suited to the requirements of service, knowledge and technology based enterprises. • It will not impose detailed legal and procedural requirement as needed in case of companies. • The structure of LLP does not restrict the benefits of LLP structure for a certain class of professional only and would be available for use by any enterprises which fulfill the requirement of LLP Act. • Allowing individual partner to be shielded from joint liability created by another partner’s wrongful business decision or misconduct. • Provision have been made in the Act for corporate actions like merger, amalgamations etc. • LLP Act and their rules also made for winding up and dissolutions of LLP (unlike partnership firm) CA. Vijay R Kalani

  5. Significant Difference between LLP & Firm • Partnership is not a legal entity separate from its partners, while LLP is a legal entity separate from its partners. • Firm is governed under Indian Partnership Act 1932, while LLP is governed under Limited Liability Partnership Act 2008. • Liability of the partner is unlimited under Indian Partnership Act while in the case of LLP , the liability of the partner is limited to the extent of their capital contribution/ commitment. • A partnership firm does not have perpetual succession but in the LLP act 2008, A LLP has perpetual succession. • In case of partnership the property of the firm belongs to partners who are collectively entitled to it but in case of an LLP the property belongs to the LLP and not to the partners individually. Maximum no. of partners are specified under the Indian Partnership Act, 1932 but there are no bar for maximum no. of partners under Limited Liability Partnership Act 2008. CA. Vijay R Kalani

  6. Distinction between Company and LLP Memorandum and Article of Association is required in case of company under Companies Act,1956. while in case of LLP, only partnership agreement is required. The members are not agents of the company, in LLP the partner is an agent of the LLP. There are less complicated procedure regarding Audit of accounts in LLP in comparison with company. A company must have a common seal but in case of LLP it’s optional. Disclosures are required where directors are interested in any contracts in case of company , No requirement of disclosure in contracts where partners are interested, unless specified in LLP agreement. Minimum paid up capital of Rs.1 lac for incorporation of Pvt. Co. and Rs. 5 lacs for incorporation of Public company is required, but no such requirement of minimum capital in Limited Liability partnership. CA. Vijay R Kalani

  7. How to create a LLP • A minimum of 2 partners will be required for making a LLP. • Appointment of at least two “Designated Partner”. Designated partner shall also be accountable for all regulatory and legal compliances, besides their liability as partner, per-se. • An Incorporation Document which is subscribed by those two partners shall have delivered to the Registrar of Limited Liability Partnership (ROLLP). Every LLP shall have a registered office and Contents of LLP agreement, as may be, shall also be required to be filed with ROLLP at the filing of LLP incorporation document. • A copy of address proof of the premises proposed to be the Registered Office of LLP alongwith NOC from the owner of the premises shall be required. • Every LLP shall be suffix the word “Limited Liability Partnership” or the acronym “LLP” as the last word of its name. CA. Vijay R Kalani

  8. What is LLP Agreement? The mutual rights and duties of partners inter se and those of the LLP and its partner shall be governed by the agreement between partners or between the LLP and the partners. This Agreement would be known as “LLP Agreement”. As per the provisions of the LLP Act, in absence of any LLP agreement ,the mutual rights and duties shall be as provided for under Schedule I of the Act. Therefore, in case any LLP propose to exclude provisions/requirement of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraph of Schedule I CA. Vijay R Kalani

  9. Procedure to be followed for to start the LLP. Acquire Designated Partner Identification No. AND Acquire Digital certificate Register DPIN, DSC With LLP Check Name Availability Track Status Receive Certificate from ROC Download LLP Forms File Electronically Limited Liability Partner Able to Function CA. Vijay R Kalani

  10. “DESIGNATED PARTNER” Every LLP have at least two Designated partners who are individual and at least one of them shall be a resident in India. Every designated partner of a LLP will obtain a Designated Partner Identification Number (DPIN) from Central Government. In form no.-7 of LLP act 2008. Prior consent of designated partner is required for his appointment as designated partner. LLP will be required to appoint a designated partner within 30 days of a vacancy, if any. CA. Vijay R Kalani

  11. Method of acquiring Designated Partner’s Identification Number (DPIN). Every individual or nominee of a body corporate shall make a application electronically in Form 7 to the Central Government for obtaining Designated Partner’s Identification Number (DPIN). Following process shall be follow to obtain the DPIN :- • Login website of Ministry of Corporate Affairs. • The applicant shall access the Form 7 from the portal, fill-in the required particulars and submit the form electronically. • A provisional DPIN generated online by the applicant will remain valid for a period of 60 days from the date on which it was generated. • The applicant shall after the allotment of provisional DPIN submit an application to the ROL. along with prescribed fee for allotment of the regular DPIN within 60 days form the date on which the provisional DPIN was generated on line. • The applicant shall attach his photograph and proof of identity which shall be certified by any one of the appropriate prescribed authority. (Gazetted officer of Central Government or State government or, Notary Public or CA, CWA, CS having certificate of practice) • DPIN allotment or rejection shall be communicated to the applicant within a period of one month from the receipt of such application. CA. Vijay R Kalani

  12. Financial disclosure and audit requirement • The Limited Liability Partnership will be required to maintain such proper books of accounts as may be prescribed relating to its affairs for each year of its existence according to prescribed accounting principles and shall maintain the same at its registered office for such period as may be prescribed. • Every LLP shall be required to prepare a Statement of Account and Solvency within a period of 6 months from the closure of each financial year, and the same shall be signed by the designated partners and will be filed to the ROCLLP within prescribed time and fee. • The accounts to be audited annually in case LLP’s having turnover more than Rs.40 lacs or contribution exceeds Rs. 25 lacs in any financial year. • Every LLP will be required to file an annual return duly authenticated with the registrar within 60 days of the closure of its financial year in prescribed manner and fee. CA. Vijay R Kalani

  13. Conversion of other Entities into LLPs And vice versa The LLP Act contain enabling provision pursuant to which a Firm, Private company or unlisted public company would be able to convert themselves into LLPs. Provision of clause 58 and Schedule II to Schedule IV to the Act provide procedure in this regard. LLP would not be allowed to convert itself into company under LLP Act. However, enabling provisions would be required to be made in the Companies Act for such conversion. Necessary action in this regard would be taken when Companies Act would be revised. CA. Vijay R Kalani

  14. Winding Up And Dissolution Winding up of LLP may be either voluntary or by the order the National Company Law Tribunal(NCLT) and LLP so wind up may be dissolved. In the following circumstances, LLP may be wound up by Tribunal:- • If LLP SO DECIDES that it should be wound up by Tribunal. • If the number of PARTNERS IS REDUCED below than 2 and LLP carries its business more than 6 months. • If LLP is UNABLE TO PAY ITS DEBTS. • If LLP has made default in filing Statement of Account and Solvency Or Annual Return for any continuous FIVE financial years. • If LLP has acted AGAINST THE INTEREST of sovereignty and integrity of India. • If the opinion of Tribunal is that its JUST & EQUITQBLE that LLP should be wound up. CA. Vijay R Kalani

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