Key Limited Liability Partnership Act 2008 and Limited Liability Partnership Rules, 2009
• The Limited Liability Partnership (LLP) Bill 2008 was passed by the Parliament on December 12, 2008 and legislated vide notification of the Act in the Gazette of India on January 7, 2009. Subsequently ‘The Limited Liability Partnership Rules, 2009’ were notified by the Central Government on April 01, 2009.
• Key features of the LLP Act are as below:
–– An LLP is a separate legal entity under the Limited Liability Partnership Act, 2008 and can sue and be sued.
–– An LLP has a perpetual succession and partners may come and go.
–– The LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP.
–– Minimum 2 partners with no limitation on maximum number of partners.
–– Foreign Nationals can be a Partner in an LLP.
–– The liability of partners is limited to the extent of their contribution, except in case of intentional fraud or wrongful act of omission or commission by the partner.
• In essence LLP combines the advantages of both the Company and Partnership into a single form of organization.
While one partner is not responsible or liable for another partner’s misconduct or negligence, in an LLP, all partners have a form of limited liability for each individual’s protection within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders, the partners have the right to manage the business directly.
Taxation of LLPs
- Taxation scheme for LLP prescribed on the same lines as currently applicable for Partnership Firms, i.e. tax will be levied on LLP and Partners will be exempt from tax.
- The definition of the terms ‘firm’, ‘partner’ and ‘partnership’ have been substituted so as to define in the context of an entity registered under the Limited Liability Partnership Act, 2008 in addition to the definitions in the context of a partnership formed under the Indian Partnership Act,1932.
- In the case of LLP, the return of income shall be signed and verified by the designated partner and where for any unavoidable reason the designated partner is not able to sign the return of income or where there is no designated partner, by any other partner.
- In the case of liquidation of an LLP, every person who is a partner of the LLP at any time during the previous year shall be jointly and severally liable for the payment of any unrecovered tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the LLP.
- It is also proposed to increase the ceiling limits of remuneration paid to the working partner of a partnership firm, which is allowed as deduction from income. For simplicity and administrative ease, the limits for professional and non-professional firms have been brought in uniformity.
The proposed ceiling limits with effect from FY 2009-10 are:
| Book Profit | Maximum deductible remuneration |
| On the first Rs. 300,000 of the book-profit or in case of a loss | Rs. 150,000 or at the rate of 90% of the book-profit, whichever is more |
| On the balance of the book-profit | At the rate of 60% |
