The newly introduced regulations on Limited Liability Partnership (LLP) have been briefly discussed in the post below. This is in response to the query in an earlier post: Company incorporation or partnership. This post has been contributed by S.C.Sharada and Jayashri Murali, Directors, Lex Valorem India Pvt. Ltd (Sharada.sc@lexvalorem.com and jayashri_m@airtelmail.in respectively).
A LLP is basically a partnership firm established under the LLP Act, 2008, consisting of Partners who contribute to the capital of the LLP and is a legal entity which is regulated by the regulatory authority who is the Registrar of Companies.
The main requirements to establish a LLP are as follows:
- A LLP can be registered by two or more persons including companies or other LLPs. The main criterion is that at least two should be individuals out of which one should be a Resident Indian.
- Out of the Partners/Promoters of a LLP an individual Partner must be a Designated Partner who shall be responsible for carrying on the business of the LLP.
- Procedural compliances like obtaining Designated Partner Identification Number (DPIN) and Designated Partner Digital Signature should be met on similar lines as a director of an incorporated company.
- A LLP Agreement must be prepared and finalized between the Promoters incorporating therein the details relating to the Partners, their capital contribution, business of the LLP, scope of business, role of each of the Partners in the LLP, management of the LLP, sharing of profit and loss, etc.
- No Partner of a LLP can be paid any remuneration even if the Partner were to be in the full time services of the LLP established/registered. Each of the Partners is entitled to share of profits of the LLP and no additional remuneration or monetary benefit can be reserved in favour of any of the Partners.
- The rights of the Partners of a LLP are transferable.
- Any partnership firm, a private limited company and a public limited company can be converted into a LLP subject to the terms and provisions of the Act.
- Unlike in a Partnership Firm where each of the Partners is liable, the LLP being a body corporate the Partners are not personally liable for the liabilities of the LLP. In other words, the LLP is a legal person independent of its Partners.
On registration of a LLP, the LLP automatically becomes:
- Capable of suing and being sued.
- Capable of acquiring, owning, holding or disposing off moveable and immoveable properties in its own name.
- Capable of doing and suffering such acts and things as bodies corporate may lawfully do and suffer.
The taxation aspects of the LLP are under consideration by the Central Government and are expected to be introduced in the near future.
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