Limited Liability Partnership in India 1.

0 Overview The concept of Limited Liability Partnership (LLP) has been introduced in India through Limited Liability Partnership Act, 2008. In this commercial vehicle one partner is not responsible or liable for another partner's misconduct or negligence. Unlike the company shareholders, the partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP's employees or other agents. Limited Liability partnership provides all the benefits of an incorporated company and a partnership firm as it is a unique business entity model which eradicates all the disadvantages of both company and a partnership firm. In an LLP, all partners have limited liability for each individual's protection within the partnership, similar to that of the shareholders of a limited company. 2.0 International Status The limited liability partnership is a very popular form of business vehicle in United States of America and United Kingdom. In United States of America limited liability partnership has emerged in 1990s. In UK it is introduced a decade ago under the limited liability act 2000. This act was enacted as a law in April 2001. The share of Limited Liability Partnership is certain in the growth and development of the economies of all the developed nations. 3.0 Introduction in India India is an upcoming market for investors across the globe. The government of India is vigorously promoting infrastructure development as one of the key area of Focus. It offers high Prospects for growth and earning potential in all areas of business. Introduction of limited liability partnership company service in India is expected to bring the Indian Partnership in the frame work of international practices but also provide an effective alternative corporate business strategy. The main purpose of limited liability partnership is to tap the growth of Indian economy with international acknowledgement of the roles played by technical and professional experts. The trend of such business enterprise is fast catching in India and across its territories making it popular word wide

4.0 On registration, a limited liability partnership shall by its name be capable of Suing and being sued Acquiring, owning, holding & developing/ disposing of property whether movable/ immovable, tangible/ intangible Having a common seal if it decides to have one Doing and suffering such other acts as bodies corporate may lawfully do and suffer. Every limited partnership shall have either words Limited Liability Partnership or the acronym LLP as the last two words of its name No limited liability partnership shall be registered by a name which in the opinion of the central government is Undesirable or Identical or too nearly resemble to that of any partnership firm or limited liability partnership or body corporate.

5.0 Advantages and Disadvantages of Limited Liability Partnership Separate legal entity Easy to establish Flexibility without imposing detailed legal and procedural requirements Perpetual existence irrespective of changes in partners Internationally renowned form of business in comparison to Company No requirement of minimum capital contribution No restrictions as to maximum number of partners LLP & its partners are distinct from each other Partners are not liable for Act of other partners. Easy to dissolve or wind-up Professionals like CS / CA / CWA / Lawyers can form Multi-disciplinary Professional LLP firms. No requirement to maintain statutory records except Books of Accounts. Less Cost of formation (Compared to a company)

Comparison between the LLP, Partnership firm and a Company:

Features
Registration

Company
Compulsory registration required with the ROC. Certificate of Incorporation is conclusive evidence.

Partnership firm
Not compulsory. Unregistered Partnership Firm will not have the ability to sue.

LLP
Compulsory registration required with the ROC

Name

Name of a public company to end with the word limited and a private company with the words private limited

No guidelines.

Name to end with LLP Limited Liability Partnership

Capital contribution

Private company should have a minimum paid up capital of Rs. 1 lakh and Rs.5 lakhs for a public company

Not specified

Not specified

Legal entity status

Is a separate legal entity

Not a separate legal entity

Is a separate legal entity

Liability

Limited extent capital.

to the of unpaid

Unlimited, can extend to the personal assets of the partners

Limited to the extent of the contribution to the LLP.

No. of shareholders / Partners

Minimum of 2. In a private company, maximum of 50 shareholders

2- 20 partners

Minimum of 2. No maximum.

Foreign Nationals as shareholder / Partner

Foreign nationals can be shareholders.

Foreign nationals cannot form partnership firm.

Foreign nationals can be partners.

Taxability

The income is taxed at 30% + surcharge + cess

The income is taxed at 30% + surcharge + cess

Not notified.

yet

Meetings

Quarterly Board of Directors meeting, annual shareholding meeting is mandatory

Not required

Not required.

Annual Return

Annual Accounts and Annual Return to be filed with ROC

No returns to be filed with the Registrar of Firms

Annual statement of accounts and solvency & Annual Return has to be filed with ROC

Audit

Compulsory, irrespective of share capital and turnover

Compulsory

Required, if the contribution is above Rs.25 lakhs or if annual turnover is above Rs. 40

lakhs.

How do the bankers view

High creditworthiness, due to stringent compliances and disclosures required

Creditworthiness depends on goodwill and credit worthiness of the partners

Perception is higher compared to that of a partnership but lesser than a company.

Less procedural compared to company. Voluntary or by Order of National Company Law Tribunal

Dissolution

Very procedural. Voluntary or by Order of National Company Law Tribunal

By agreement of the partners, insolvency or by Court Order

Whistle blowing

No such provision

No such provision

Protection provided to employees and partners who provide useful information during the investigation process.

But, LLP might not be a choice due to certain extraneous reasons, for example, DOT would approve the application for a leased line only for a company; Angels / VCs would be comfortable investing in a company.