Professional Documents
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2008, with effect from April 1, 2009. link (pdf) . LLP combines the advantages of ease of running a Partnership and separate legal entity status and limited liability aspect of a Company. Here are some of the main features of a LLP
LLP is a separate legal entity separate from its partners, can own assets in its name, sue and be sued.
Unlike corporate shareholders, the partners have the right to manage the business directly One partner is not responsible or liable for another partners misconduct or negligence. Minimum of 2 partners and no maximum. Should be for profit business. Perpetual succession. The rights and duties of partners in LLP, will be governed by the agreement between partners and the partners have the flexibility to devise the agreement as per their choice. The duties and obligations of Designated Partners shall be as provided in the law.
Liability of the partners is limited to the extent of his contribution in the LLP. No exposure of personal assets of the partner, except in cases of fraud.
LLP shall maintain annual accounts. However, audit of the accounts is required only if the contribution exceeds Rs. 25 lakhs or annual turnover exceeds Rs.40 lakhs.
A LLP is indeed advantageous because of comparatively lower cost of formation, lesser compliance requirements, easy to manage and run and also easy to wind-up and dissolve, no requirement of minimum capital contributions, partners are not liable for the acts of the other partners and importantly no minimum alternate tax (as of date). But, LLP cannot raise money from the public. The process for incorporating a LLP is pretty simple. The flow chart here depicts it clearly. The Registrar of Companies (ROC) is the authority having jurisdiction over the incorporation. The steps required are:
Decide on the Partners and the Designated Partners Obtain Designated Partner Identification Number (DPIN) and a digital signature certificate. Decide on the name of the LLP and check whether it is available. Draft the LLP agreement File the LLP Agreement, incorporation documents and obtain the Certificate of Incorporation.
In order to help you decide on which legal form to choose, heres a feature comparison between the LLP, Partnership firm and a Company:
Features
Company
Partnership firm
LLP
Registration
Compulsory registration required with the ROC. Certificate of Incorporation is conclusive evidence.
Not compulsory. Unregistered Partnership Firm will not have the ability to sue.
Name
Name of a public company to end with the word limited and a private company
No guidelines.
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
Liability
2- 20 partners
Minimum of 2. No maximum.
Taxability
Meetings
Not required
Not required.
mandatory
Annual Return
Annual statement of accounts and solvency & Annual Return has to be filed with ROC
Audit
Compulsory
Required, if the contribution is above Rs.25 lakhs or if annual turnover is above Rs. 40 lakhs.
How do the
bankers view
Dissolution
Less procedural compared to company. Voluntary or by Order of National Company Law Tribunal
Whistle blowing
No such provision
No such provision
Protection provided to employees and partners who provide useful information during the investigation process.