• 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
There should be atleast 2 persons (natural or artificial) are required to form a LLP. In case any Body is a partner, than he will be required to nominate any person (natural) as its nominee for the purpose of the LLP.
Following can become a partner in the LLP
Company incorporated in and outside India
LLP incorporated in & outside India
Individuals resident in & outside India
Contribution
In case of LLP, there is no concept of any share capital but every partner is required to contribute towards the LLP in some manner. The said contribution can be tangible, movable or immovable or intangible property or other benefit to the limited liability partnership, including money, , and other agreements to contribute cash or property, and contracts for services performed or to be performed.
the contribution is in intangible form, the value of the same hall be certified by a practicing or by a practicing Cost Accountant or by approved valuer from the panel maintained by the Central Government. The monetary value of of each partner shall be accounted for and disclosed in the accounts of thelimited liability partnership in the manner as may be prescribed.
The LLP Agreement must specify the contribution intended to be paid all the members and the form in which it will be paid.
Designated Partners
‘Designated Partner’ means a partner who is designated as such in the incorporation documents or who become a designated partner by and in accordance with the Limited Liability Partnership Agreement.
Every limited liability partnership shall have at least two designated partners who are individuals and at least one of them shall be a resident in India Provided that in caseof a limited liability partnership in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such limited liability partnership or nominees of such bodies corporate shall act as designated partners.
Designated Partner shall be:
Responsible for the doing of all acts, matters and things as are required to be done by the limited liability partnership in respect of compliance of the provisions of this Act including filing of any document, return, statement and the like report pursuant to the provisions of this Act and as may be specified in the limited liability partnershipagreement; and
Liable to all penalties imposed on the limited liability partnership for any contravention of those provisions.
Explanation.—for the purposes of this section, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty-two days during the immediately preceding one year.
Designated Partners Identification Number (DPIN)
Every Designated Partner is required to obtain a DPIN from the Central Government.
DPIN is an eight digit numeric number allotted by the Central Government in order to identify a particular partner and can be obtained by making an online application in Form 7 to Central Government and submitting the physical application along with necessary identity and Address proof of the person applying with prescribed fees. However if an individual already holds a DIN (Director Identification Number), the same shall deemed to be the DPIN (Designated Partner ), and for the purpose, an intimation to be made in Form 25 with Central Government.
It is not necessary to apply Designated Partner Identification Number every time you are appointed partner in a LLP, once this number is allotted it would be used in all the LLP’s in which you will be appointed as partner.
Digital Signature Certificate
All the forms like eForm 1, eForm 2, eForm 3 etc which are required for the purpose of incorporating the LLP are filed electronically through the medium of Internet. Since all these forms are required to be signed by the partner of the proposed LLP and as all these forms are to be filed electronically, it is not possible to sign them manually. Therefore, for the purpose of signing these forms, at least one of the Designated Partner of the proposed LLP needs to have a Digital Signature Certificate (DSC).
The Digital Signature Certificate once obtained will be useful in filing various forms which are required to be filed during the course of existence of the LLP with the Registrar of Companies.
LLP Name Approval, Prohibited word, Words which require Approval
Selection of the name for the proposed LLP to be incorporated is one of the important processes of the entire incorporation process, ideally the name of the LLP should be such which represents the business or activity intended to be carried on by the LLP. Before selecting the name of the LLP, it is necessary to evaluate the proposed name under the following given criteria:
LLP with Similar Name: The proposed name of the LLP should not be similar to the name of the Company or LLP, which is already registered in India.For example:Name of Company already registered: XYZ Consultants Pvt Ltd Name of Proposed LLP: XYZ Consultants LLP Whether Proposed Name would be available: No
Prohibited Word: The Ministry of Corporate Affairs of India has prescribed certain words, which should not form part of the name of LLP intended to be incorporated, such words are prohibited under The Emblems and Names (Prevention of improper use) Act, 1950. Following is the List of Prohibitive words alongwith reasons:-
National, Union, Central, Federal, Republic, President, Rasthrapathi, Small Scale Industries, Cottage Industries, Financial Corporations, Municipality, Panchayat or any other word imparting connection Union or State Government : It signifies Government Patronage or Participation.
State together with the name of Particular State for e.g. Delhi state corporations Ltd : Itgives an impression that the state is also participating in the paid up share capital of the company.
Ashoka Chakra, Dharma Chakra, Name of Parliament , State Legislature : Prohibited Under Emblems & Names (Prevention of Improper Use ) Act, 1955.
Rama Krishna Math, Ramakrishna Sarada Mission, Bharat Scouts, Interpol : Prohibited Under Emblems & Names (Prevention of Improper Use ) Act, 1955.
Chhatarpait Shivaji Maharaj, Mahatma Gandhi or the name of any Prime Minister/President of India : Prohibited Under Emblems & Names (Prevention of Improper Use ) Act, 1955.
Words Based on Approval: Various government regulatory authorities operatingin India like Securities & Exchange Board of India, Reserve Bank of India, has prescribed certain words, which if forms part of the name of the proposed LLP to be incorporated, requires there first hand approval.Following is the List of Words which requires approval alongwith the Name of the Authority from whom approval is required:-
Venture Capital/Venture Capital Company/Venture Capital Fund/Venture Capital Finance Company:- Department of Economic Affairs/ SEBI
Stock Exchange/Mutual Funds:- Securities Exchange Board of India (SEBI)
Name belongs to registered trade mark:- Owner of the registered trade mark
Insurance:- Insurance Development Regularity Authority of India (IDRA)
Bank, Banker, Banking:- Reserve Bank of India (RBI)
Names reserved for Foreign LLP/Companies:In case Foreign LLP/Companies have reserved their name under rule 18 of the LLP Rules 2009, than that name will not be applicable for forming of LLP to persons other than the Foreign LLP/Company
LLP Agreement
For the purpose of forming a LLP, there should be agreement between the partners interested in forming the LLP to be known as LLP Agreement. The said the basis of the formation of LLP and lays down its founding structure. The LLP agreement is an agreement between the Partners and between the LLP & its partners.
The basic contents of Agreement are:
Name of LLP
Name of Partners & Designated Partners
Form of contribution
Profit Sharing ratio
Rights & Duties of Partners
In case no agreement is entered into, the rights & duties as prescribed under Schedule I to the LLP Act shall be applicable. It is possible to amend the LLP Agreement but every change made in the said agreement must be intimated to the Registrar of Companies.
Registered Office
The Registered office of the LLP is the place where all correspondence related with the LLP would take place, though the LLP can also prescribe any other for the same. . A registered office is required for following purposes:
All the statutory records and books of accounts of the LLP will be maintained at this office.
The Jurisdiction of Registrar of Companies is based on the registered office of the LLP
At the time of incorporation, it is necessary to submit proof of ownership or right to use the office as its registered office with the Registrar of Companies.
The UAE legal system considers the cheque instrument of payment as substitute of money, consequently the non-payment of cheque can be pursued not only through civil litigation but also as a crime that makes necessary to inflict criminal punishment under criminal proceeding as per Article Art. 401 of the Federal Penal Code No. 3 of 1987.
The drawer shall be punished with imprisonment that may not be less than 1month and not more than 3years or with fine not less than Dh100 and not exceeding Dh30,000. Moreover, the Civil Court may order in addition the punishment of publishing the extract of the judgment in a daily newspaper, to withdraw the cheque book of the convicted and to ban granting new cheque book for a period to be decided by the court.
Just a quote from an article "Fraud, including bouncing cheques and the non-payment of bills (including hotel bills), is regarded seriously in the UAE and can result in imprisonment and/or a fine. Bail is generally not available to non-residents of the UAE who are arrested for crimes involving fraud."
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