LIMITED LIABILITY PARTNERSHIP ACT 2008 & RULES 2009

Priya Bhansali KUMBHAT & Co.,Chartered Accountantswww.bhansali.in

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KUMBHAT & CO.,AgendaGenesisSalient FeaturesComparison between Partnership/LLP/Private Limited Co.Chapters under LLP Act RulesLLP in Other CountriesCertain Issues

KUMBHAT & CO.,*

KUMBHAT & CO.,GENESIS OF LLPLLP 1991 in Texas Loan and savings failuresUniform Partnership Act 1996 - USALLP Act 2000 UKAbid Hussain Committee -1997Naresh Chandra Committee 2003JJ Irani Expert Committee 2005Naresh Chandra 2nd Committee July 2005

KUMBHAT & CO.,

KUMBHAT & CO.,Concept PaperRole of service sectorLimitation of Multi-disciplinary partnershipLimitation of no. of PartnersLitigation joint liabilities in case of partnershipHybrid between a Company and PartnershipProfession as well as SME

KUMBHAT & CO.,

KUMBHAT & CO.,What is LLP LLP separate legal entity with unlimited capacity to do anything a natural person can do UK Partnership formed under LLP Act 2008

KUMBHAT & CO.,

KUMBHAT & CO.,Salient FeaturesLLP for all kinds of businessLimited Liability Simple when compared to a CompanyMinimum Partners 2 ; no limit for maximumLegal Entity Artificial Juridical PersonMembers & Mutual RightsDesignated PartnersUnlimited Capacity no main objects Conversion

KUMBHAT & CO.,*

KUMBHAT & CO.,Salient FeaturesCannot be listed Incorporation DocumentFlexibility on internal structure No BOD etcMergersWinding up

KUMBHAT & CO.,

KUMBHAT & CO.,Formationof LLPSimilar to that of formation of CompanyAcquire DSC and DPINRegister DSC and DPIN with LLPCheck name availabilityDownload FormsFile ElectronicallyTrack StatusReceive Certificate Start Business

KUMBHAT & CO.,

KUMBHAT & CO.,AdvantagesLimited LiabilityMembers cannot be responsible for the act of any other member inter se agreement between membersNo Maximum No. of PartnersEasier Operations PerpetualCompliances SuccessionNo BOD, meetings/minutesRemuneration

KUMBHAT & CO.,

KUMBHAT & CO.,DisadvantagesCompliance Annual Filings, Solvency, DuplicationOne person LLP concept absentLimitation of 2 member LLP result in closure Documents available for public scrutinyPenalty for non complianceTaxation - Tax like partnership taxation on converison not yet clear -

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KUMBHAT & CO.,Regulatory Frame WorkLegalAdministrationTaxation

KUMBHAT & CO.,

KUMBHAT & CO.,Regulatory FrameworkLegal

LLP Act 2008 - Companies Act 1956 - IT Act 2000 - Indian Partnership Act 1932 - General Clauses Act 1897 - SEBI Act 1972 - CPC 1908 - Other Acts - Professionals - Advocate Act 1961 - CA Act 1949 - CS Act 1980 - CWA Act 1959Administration

- MCA - ROC - Tribunal - Official Liquidator

KUMBHAT & CO.,

KUMBHAT & CO.,ComparisonApplicable LawLiabilityPerpetual ExistenceSeparate Legal EntityMinimum NumberMaximum Members Documents defining activities

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KUMBHAT & CO.,ComparisonDocument providing procedureManagementCompliance/Accounts/AuditMinimum No. of DirectorsTransferability of sharesConversionCommon SealChange of Regd OfficeChange of Name

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KUMBHAT & CO.,ComparisonOppression & Mis-managementAnnual Filing E filing

KUMBHAT & CO.,*

KUMBHAT & CO.,Chapters under the ActPreliminaryNature of LLPIncorporation of LLP and matters incidental theretoPartners and their relationsExtent & Limitation of LLP and partnersContributionsFinancial Disclosures

KUMBHAT & CO.,*

KUMBHAT & CO.,ChaptersAssignment & Transfer of partnership rightsInvestigationConversion to LLPForeign LLPCompromise, arrangement or reconstruction Winding up and dissolutionMiscellaneous

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KUMBHAT & CO.,SchedulesFirst Schedule - matters relating to mutual rights and duties -like Table ASecond Schedule Conversion of firm into LLPThird Schedule Conversion of Private Ltd Co into LLPFourth Schedule Conversion of Unlisted Public Co. into LLP

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KUMBHAT & CO.,LLP Rules LLP Rules 2009 is notified, additions as and when need arises18 chapters, 41 Rules, 4 Annexures, 30 formsCovers all the sections Definitions to Winding up, Compounding , Destruction of old records etcConcept LLP (Winding up and Dissolutions) Rules 200

KUMBHAT & CO.,

KUMBHAT & CO.,Designated PartnerTo be specified in AgreementOne must be a Resident of IndiaResponsible for all complianceBody corporate

KUMBHAT & CO.,

KUMBHAT & CO.,Audit and AccountsProper Books of AccountsCash or accrual basisStatement of Account and SolvencyAudit Not compulsory unless Turnover is > Rs.40 lacs or Contribution > Rs.25.00 lacs, conditions of R 24 Appointment by DP, 30 days before closure of FYFinancial year defined as April - MarchPenalty LLP Rs.25K Rs.5.00 lacs & DP Rs.10K - Rs.1.00 lac

KUMBHAT & CO.,

KUMBHAT & CO.,Accounts & Annual ReturnsStatement of Account and Solvency Statement to be prepared within 6 m of end of FY and file Form 8 within 30 days of end of 6 m periodAuthenticated by DP Penalty for non- compliance Rs.10K to Rs 1.00 lac for each DP and LLP Rs.25K to Rs.5.00 lacs.Annual Return duly authenticated

KUMBHAT & CO.,

KUMBHAT & CO.,AuditorsSection 34(4) & Rule 24(8) to 24 (19)Authority - Designated Partners other partners ?When the appointment to be made 30 days before the end of each Financial yearTerm of appointment till the next period Audit exempted if turnover < Rs.40 lacs or contribution does < Rs. 25 lacs

KUMBHAT & CO.,

KUMBHAT & CO.,Auditors (contd.)Re-appointmentRemunerationRemoval of an Auditor

KUMBHAT & CO.,

KUMBHAT & CO.,Other CountriesUSAUKJapanCanadaChinaSingapore

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KUMBHAT & CO.,TAXATIONLLP and members will be taxed like partnership and partners Capital Gains on sale of LLP assetsReceiving Share of accumulated profits?Transfer of Shares

KUMBHAT & CO.,

KUMBHAT & CO.,Taxation (contd.)UK Income taxed in hands of partnersUK Capital Gains on transfer of assets of LLP is also taxed in the hands of partners as if they own the sameUS - reported in individual returns of the partnersJapan Each member is directly subject to taxSingapore Personally taxed, taxed as self employedChina passed through and attributed to partners

KUMBHAT & CO.,

KUMBHAT & CO.,IssuesMinors, HUF can they be partners?Act is very small when compared to Cos Act 1956 but looks as if the Rules/Notifications will rule the Act General Names? Small Names ? Disclosure of Business in Name/ Objection

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KUMBHAT & CO.,Foreign LLPSection 59 Establishment of place of Business in IndiaBusiness activity carried on in IndiaPermission from RBI may be required under FEMAFLLP has to file certain documents, Accounts and Solvency Statement in EnglishNotice of cessationCertification and Authentication from Notary Public/Commissioner of Oaths in the Company it is incorporated

KUMBHAT & CO.,

KUMBHAT & CO.,

Lots to examine and explore !!

www.llp.gov.in

THANK YOUwww.bhansali.in

KUMBHAT & CO.,*

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