Limited liability partnership


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LLP, a legal form available world-wide, now introduced in India and is governed by the Limited Liability Partnership Act 2008, with effect from April 1, 2009

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Limited liability partnership

  2. 2. Topics Covered About LLP Salient features of LLP Benefits of LLP over Company Benefits of LLP over Partnership firm Conversion of company into LLP Services offered by us DNS Advisors
  3. 3. About LLP:LLP, a legal form available world-wide, now introduced inIndia and is governed by the Limited Liability Partnership Act2008, with effect from April 1, 2009Limited Liability Partnership (LLP) is a corporate businessvehicle that provides both the benefits of a company andpartnership firm i.e. limited liability and allows its membersthe flexibility of organizing their internal structure as apartnership based on a mutually arrived agreement.
  4. 4. SALIENT FEATURES:• Body corporate and separate legal entity from its partners• Liability of partners limited to their contribution• No requirement of minimum capital contribution• Perpetual existence irrespective of changes in partners• Rights and duties of partners shall be governed by an agreement between partners.• Minimum two partners require as of whom at least one shall be resident in India.• No restrictions as to maximum number of partners• No requirement of audit if contribution does not exceed Rs 25 Lakhs or annual turnover does not exceeds Rs 40 Lakhs.• A firm, private company or an unlisted public company can also be converted into LLP.• The Indian Partnership Act, 1932 shall not be applicable to LLPs. DNS Advisors
  5. 5. Benefits of LLP over limited company: Minimum Alternative Tax (MAT) not applicable Corporate Dividend Tax (CDT) not applicable Lower cost of formation Lesser compliance requirements Easy to manage and also easy to wind up and dissolve No requirement of minimum capital contributions DNS Advisors
  6. 6. Minimum Alternative Tax (MAT) not applicableLower Tax LiabilityExample 1Particulars Company LLPBook Profits 2,00,000 2,00,000Taxable Profits 50,000 50,000Tax at normal rates (A) 15,000 15,000Tax as per MAT (B) 36,000 NILTax Payable (higher of A/B) 36,000 15,000Residual Profits 1,64,000 1,85,000Net Gain 21,000 DNS Advisors
  7. 7. Minimum Alternative Tax (MAT) not applicableExample 2Particulars Company LLPBook Profits 3,20,000 3,20,000Taxable Profits 80,000 80,000Tax at normal rates (A) 24,000 24,000Tax as per MAT (B) 57,600 NILTax Payable (higher of A/B) 57,600 24,000Residual Profits 2,62,400 2,96,000Net Gain 33,600 DNS Advisors
  8. 8. Corporate Dividend Tax (CDT) not applicableIn the case of a company, if the owners to withdraw profits fromcompany, an additional tax liability in form of CDT @15% (plussurcharge and Education Cess) is payable. However no such tax ispayable in the case of Limited Liability partnership and profits of thefirm can be freely withdrawn by the partners.Carrying above example forward: Particulars Company LLP Residual Profits 2,62,400 2,96,000 Tax on distribution 44,595 NIL Distributable Profits 2,17,805 2,96,000 Net Gain 78,195 DNS Advisors
  9. 9. Lower cost of formationFeatures Company LLPLegal Cost to Incorporate Rs 8,000 Rs 2,500having capital of Rs 1 lakhLegal Cost to Incorporate Rs. 20,000 Rs. 4,000having capital of Rs 5 lakhLesser compliance requirementsFeatures Company LLP Quarterly Board of Directors meeting, annualMeetings Not required shareholding meeting is mandatory Required, if the contribution Compulsory, irrespective of is above Rs.25 Lakhs or ifAudit share capital and turnover annual turnover is above Rs. 40 Lakhs DNS Advisors
  10. 10. Easy to manage and also easy to wind up anddissolveFeatures Company LLP Less procedural asDissolution Very procedural compared to company.No requirement of Minimum CapitalContributionsFeatures Company LLPMinimum Capital Rs 1 lakh (for private Company) No such mandatoryContributions Rs 5 lakh (for public company) requirement DNS Advisors
  11. 11. Benefits of LLP over Partnership firm: Partners of LLP not personally liable for the obligations of entire partnership. LLP protects a partner from the liability arising from the misconduct or personal acts of other partners Foreign nationals can be partners in a LLP unlike in partnership firm A separate legal personality distinct from its partners, can own assets in its name, sue and be sued. An LLP is taxed as a partnership, but has the benefits of being a corporate No upper limit on number of partners in an LLP DNS Advisors
  12. 12. Conversion of private or unlisted public company intoLLP:Finance Act 2010: No Capital gain on ConversionTransfer of capital assets on conversion of a private / an unlisted publiccompany into a LLP as per the provisions of LLP Act, 2008 shall not betreated as transfer for the purpose of capital gains tax subject to followingconditions• The turnover or gross receipts of the company in any 3 years preceding the year of conversion should not exceed Rs. 60 Lakh• No amount is paid to any partner out of the accumulated profit on the date of conversion for a period of three years from the date of conversion• All the assets and liabilities of the company should become the assets and liability of the LLP• All the shareholders of the company should become partners in the LLP DNS Advisors
  13. 13. Services offered by us:• Formation of LLP• Conversion of firm into LLP• Conversion of Private limited/unlisted public company into LLP• Reservation of name• LLP annual filing DNS Advisors
  14. 14. Contact us DNS Advisors Contact Persons Registered Office: Deepak Gupta B - 2/259, Yamuna Vihar M +91 98113 00590 New Delhi – 110053 E Tel: 011 43658452 Naveen Goyal Corporate Office: M +91 99110 95297 W-123 Greater Kailash II E New Delhi -110048Disclaimer:This document is prepared for information purposes only. No reader should act on the basis of any statementcontained herein without seeking professional advice. The firm expressly disclaims all and any liability to anyperson who has read this, document or otherwise, in respect of anything, and of consequences of anythingdone, or omitted to be done by any such person in reliance upon the contents of this document. DNS Advisors