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samraswe


Limited Liability Partnership a New Concept

Background and History
The origins of LLP can be established in Europe. The birth place of this concept was Italy but the first of its regulation was made in France in 1673. Subsequently it spread to the UK and then to its counterpart in Europe, Apart from India, many other company recognize LLP as a business medium as of today including USA, Singapore, Japan, UK, China, Germany, Canada, Greece, Poland, Romania, etc.
Internationally LLP is a preferred vehicle for business particularly for the service industry or activities involving professional like Company Secretary, Advocates, Chartered Accountant.

Limited Liability Partnership, a body corporate, is a worldwide recognised business vehicle that has been introduced in India by way of much desired, long awaited, Limited, Liability Partnership Act, 2008. LLP is a hybrid of the Company and Partnership into a single form of organisation. lt enables professional expertise and entrepreneurial initiative to combine and operate in a flexible, innovative and eflicient manner, providing benefits of limited liability, allowing its members the flexibility for organising their internal structure as a partnership with mutually arrived agreement. A Limited. Liability Partnership is managed as per the LLP Agreement. However, in the absence of such agreement, the LLP would be governed by the framework provided in Schedule tl, of the Limited Liability Partnership Act, 2008. LLP has many advantages. Unlike the owners of a Company, all the owners (partners) of an LLP have the right to manage the business directly. T ill date, it has no mandatory audit requirements for business whose contribution does not exceed ?” 2.5 lakh or turnover for the year does not exceed ? 40 lakh. However, it is necessary to modify the turnover limit to ? crore, similar to the tax audit provisions under Section 44AB ofthe Income-•tax. Act. ln addition to this, it has been clothed with the characteristic of perpetual succession. lt can be said that, "partners may come and partners may go, but LLP may go on forever.” Read on to know mores. Limited Liability Partnership, a body corporate, is a
worldwide recognised business vehicle that has been introduced in India by way of much desired, long awaited, Limited Liability Partnership Act, 2008. LLP is a hybrid of the Company and Partnership into a single form of organisation. It enables professional expertise and entrepreneurial initiative to combine and operate in a flexible, innovative and efficient manner, providing benefits of limited liability, allowing its members the flexibility f0I‘ organizing their internal structure as a partnership with mutually arrived agreement. A Limited Liability Partnership is managed as per the LLP Agreement. However, in the absence of such agreement, the LLP would be governed by the framework provided in Schedule I of the Limited Liability Partnership Act, 2008. LLP has many advantages. Unlike the owners of a Company, all the owners (partners) of an LLP have the right to manage the business directly.
Till date it has no mandatory audit requirements for business whose contribution does not exceed 25 lakh or turnover does not exceed for the year 40 lakh. However it is necessary to modify turnover limit 1 crore similar to Tax audit provision under Section 44AB of the Income Tax Act.

Salient Features
1. An LLP is a body corporate and legal entity distinct from its parteners and has perpetual succession. Any two or more person associate to carrying lawful business to earn profit may form LLP under the Act.
2. The provision of Indian Partnership Act, 1932 are not applicable to an LLP and it is regulated by the contractual agreement among the partners.
3. An LLP is a combination of partnership and corporate which has a organizational flexibility and tax status of a partnership, while having the status of a body corporate.
4. Every Limited Liability Partnership shall use word “Limited Liability Partnership” as the last word of its name.
5. Every LLP have atleast two partners. It shall have atleast two designate partners, of whom atleast one shall be resident of India.
6. All the partners shall act as agent of the LLP but not for the other partners.
7. An LLP agreement is not mandatory. In the absence of LLP agreement, execution of mutual rights and liability of partners shall be determined or governed as provided under Schedule I to the LLP act.
8. An unlisted public company, private company is allowed to be convert into LLP in accordance with LLP Act, 2008.
9. No upper Limit for members or designated partners is prscribed under the act.
10. No prior approval of central Government is required in increase in no of designated partners under the act.

Advantages of Forming LLP
1. Renowned form of business.
2. Simplicity in formation.
3. Body Corporate
4. Perpetual Succession
5. Liability
6. Flexible to Manage
7. Minimum Contribution
8. Easy Transferable Ownership
9. Separate Property
10. Capacity to Sue
Disadvantages
1. Any act of the partner without the partner may blind LLP.
2. Under some cases, liability may extend to personal asset of partners.
3. Cannot raise money from public.
4. Not easy to dissolve or wind up as compared to partnership firm.
5. For change in address, change in partners, change in shares of partners agreement LLP required to be altered for every time.
6. There is a lack of privacy, financial statements are required to be file under Section 34 of the Act.
7. Legal uncertainties -as a newly introduce concept it is yet to set its entire inclusive and iclusive areas.
Incorporation
The Act has defined “Limited Liability Partnership” to mean a partnership formed and registered under this Act. This stipulates two requirement.
1. A partnership and,
2. The need of its registration.
Thus, the registration of LLP is compulsory under the Limited Liability Partnership Act, 2008. The certificate of incorporation is a conclusive evidence of its formation.
Section 11 and 12 of the Act contains provision for formation and incorporation of LLP. After that one has to file required Incorporation Form 2 (Incorporation Document and Subscriber Statement). The registering authority is the Registrar of Companies under the Companies Act. The ROC would register incorporation document and issue certificate of incorporation with in 14 days of completion of all formalities specified under the Act.

Partners
At least two person are required to form an LLP. In case any body corporate is partner, then it should nominate any natural person as its nominee for the purpose of LLP.
The following can become a partner.
1. Company incorporate in India or outside India.
2. LLP incorporate in India or outside India.
3. Individual resident in India or outside India.

Designated Partner
‘Designated Partner’ means a partner who is designated as such in the incorporation documents or who has become designated partner by and accordance with ‘Limited Liability Partnership Agreement’.
In case of an LLP in which all the partners are body corporate or in which one or more person are individual or bodies corporate, at least two partner or nominees of bodies corporate shall act as a designated partner.
The designated partner shall responsible for all act, matters and things to be done by LLP in respect of all compliances, rules and provision of the Act.

Application for DIN
All the designated partner of proposed LLP shall obtain Director Identification Number (DIN) by filing e form DIN 1. If a person has been allotted both DPIN and DIN the DPIN will stand cancelled. In case person already have DIN same can be use for LLP as well.

Acquire DSC
All the filings of done by the LLP are required to filed with Digital Signature by the person authorized to sign the document. The designated partner should acquire DSC and registered same.


LLP Agreement
The most important document of Limited Liability Partnership is the Limited Liability Partnership agreement. It is public document relating to rights and duties as set out in I schedule.
After incorporation of an LLP, an initial LLP agreement is to be filed within 30 days of incorporation of LLP in Form 3 (information with regard LLP Agreement and changes, if any, made therein).
Foreign LLP
Any foreign LLP can established its place of business in India by filing Form 27 (Registration by particulars Foreign Limited Liability Partnership ). The e -form has to be digitally signed by the authorized representative of the FLPP. There is no mandatory obtain DIN for designated partners of FLPP but the DSC of authorized representative is mandatory.
Conversion
The procedure for conversion existing firm into LLP
Any existing partnership firm that willing to get converted into an LLP that will need to apply Form 17 (Application and statement for the conversion of firm into LLP). Form 17 needs to be filed along with Form 2 (Incorporation document and subscriber statement).

Closing an LLP
Any LLP can close down by any of the following ways.
1. Declaring the LLP as Defunct
2. Winding up.
Declaring the LLP as Defunct
In case any LLP wants to close down it business or where it is not carrying any business operation for the period one year or more, it can make application to Registrar for declaring the LLP as defunct and removing the name of LLP from its register. E Form 24 has to be filed with Registrar striking off the name of LLP under clause (b) sub rule 1 of Rule 37 of LLP Rules 2008. Similarly the Registrar also has the power to strike off name of LLP.
Winding Up
Voluntary Winding up
The partners may between them decide to stop and wind up the operation of LLP.
Compulsory Winding Up
A LLP may be compulsory wind up by Tribunal-
1. If LLP decide that LLP wound up by Tribunal.
2. If more than six month partners reduce by minimum number of below two.
3. If LLP is unable to pay its debt.
4. If LLP has acted against the sovereiginity and integrity of India.
5. If the LLP has failed to file with registrar statement of annual return, solvency, accounts for any five consecutive years.
6. If the Tribunal has opinion that it just equitable grounds that LLP has being wound up.

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