
Malad Goregaon CPE Study Circle. 1. FORMATION OF LLP. CA.J M TIWARI. Malad Goregaon CPE Study Circle. 2. LIMITED LIABILITY PARTNERSHIP FOLLOWING IS NOT COVERED : 1. CONCEPT OF LIMITED LIABILITY 2. MERGERS, AMALGAMATIONS, WINDING-UP, INSPECTION. 3. TAXATION
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LIMITED LIABILITY PARTNERSHIP
FOLLOWING IS NOT COVERED :
1. CONCEPT OF LIMITED LIABILITY
2. MERGERS, AMALGAMATIONS, WINDING-UP, INSPECTION.
3. TAXATION
4. STAMP DUTY IMPLICATIONS ON LLP
TODAY’S MENU :
[A] BACKGROUND & CONCEPT IN BRIEF
[B] CHARACTERISTICS OF LLP
[C] FACTORS TO BE CONSIDERED FOR CHOOSING LLP FORM
[D] INCORPORATION & REGISTRATION OF LLP
[E] CONVERSION OF FIRM IN LLP
[F] CONVERSION OF COMPANY IN LLP
[G]SOME IMPORTANT PENALTY CLAUSES
[H] SOME IMPORTANT ISSUES
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[A] BACKGROUND & CONCEPT IN BRIEF
LLP form of business is expected to provide much needed Legal Entity status with no limit on number of partners unlike private limited company with a ceiling of 50. It is a hybrid business vehicle between Partnership & Limited Company.
Definition as given on website :
LLP: A corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner, providing benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a partnership
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[B] Certain Charasteristics of LLP :
1. Legal Entity distinct from its Partners Sec.3(1). It has Perpetual Succession. Sec 3(2)
2. Minimum 2 Partners Sec.6
3. Any Individual or Body Corporate may become a partner.Sec.5
4. Minimum 2 Designated Partners are required and atleast one shall be resident in India. (Resident means a person stayed in India for 182 days or more during immediately preceeding year). Sec.7
5. LLP does not have share capital nor a Board of Directors to manage. Instead LLp has Contribution & Designated Partners.
6. Unlike Company, Control & Membership are not different.
7. Indian Partnership Act, 1932 donot apply to LLP. Sec.4
8. Limited Liability – The Court is entitled to lift the mask of corporate veil where fraud or improper conduct is intended or if it is used for tax evasion. However, the authorities provide little guidance as to the circumstances in which this power is to be exercised
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[C] FACTORS TO BE CONSIDERED FOR CHOOSING LLP FORM
Favourable Factors :
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“In case of foreign nationals residing outside India in countries signatory to the Hague Apostile Convention, 1961 and seeking to register a LLP in India, their signatures and address on the incorporation documents and proof of identity, where required, shall be notarized before the notary of the country of their origin and be duly apostillised in accordance with the said Hague Convention.”
However, some clarifications in this regard are expected from RBI.
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However, information about any charge on properties are required to be mentioned in Form No.8 at the time of Annual Reporting.
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[C] FACTORS TO BE CONSIDERED FOR CHOOSING LLP FORM
Unfavourable Factors :
If any entity finds that any LLP is formed with name similar to its name, it may apply to ROC for change of name within 24 months of registration and LLP is required to change its name within 3 months of the order.
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[D] INCORPORATION & REGISTRATION OF LLP
Steps in brief :
1A. REGISTER with website llp.gov.in
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1. Partners :
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2. Designated Partner :
3. Get Digital Signaturefor ALL Designated Partner.
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4. Get DPIN [DESIGNATED PARTNER IDENTIFICATION NUMBER] :
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Designated Partner Photo Certifiedaffix photo
NAME : Mr xyzI
FATHER’S NAME : Shri pqr
NATIONALITY : INDIAN
CATEGORY : RESIDENT, INDIVIDUAL
PAN : AAABB1234C
DATE OF BIRTH : 09.11.1989
OCCUPATION : BUSINESS
PERMANENT ADDRESS : 7, SEETA MAHAL,
BOMANJI PETIT LANE, HAJI ALI
MUMBAI 400 036
EMAIL : hah@zcare.com
Signature 1 ____________
Signature 2 ____________
Hard copy may be sent to Office of Registrar, Ministry of Corporate Affairs, 3rd Floor, “Paryavaran Bhawan”, CGO Complex, Lodhi Road, New Delhi-110003
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5. Register DSC for related DPIN.
6. Name Reservation for LLP :
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7. Drafting of LLP Agreement :
8. Incorporation Documents
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After name approval, Incorporation Document in Form No.2 can be filled.
Form 2 : Incorporation Documents
Contents are :
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Attachment to form 2 are :
1. If Partner is a Body Corporate, Resolution on letterhead duly certified by Director.
2. Proof of Address of Registered Office.
3. Subscriber Sheet in the format given in clause 12.
Once the form 2 is approved, LLP is formed. A unique number i.e. LLPIN is allotted.
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Form 3 : Information with regard to LLP Agreement
Contents are :
Attachments to Form 3:
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9. SOME IMPORTANT MATTERS TO BE NOTED :
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Conversion IN LLP
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[E] CONVERSION OF FIRM IN LLP
Act provides for conversion of firm, private company or unlisted public company only. There is no provision to convert sole proprietorship company, listed public company or trust.
After name approval, Application for Conversion of Firm is to be made in Form 17 online.
Following attachements are required :
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[F] CONVERSION OF COMPANY IN LLP
After name approval, Application for Conversion of Company is to be made in Form 18 online.
Following attachements are required :
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[H] Some important issues :
1. FDI Regulation currently does not recognize LLP form of business. Hence, some clarifications from RBI are required in this regard.
2. CA Act do not allow to practice under LLP form of business. It may be in the benefit of SME CAs at large.
3. IS THE LIABILITY REALLY LIMITED :