my project report on LLP

1. STPR – Final Presentation
Capital raising and growth in Limited Liability Partnership

2. Objectives
• Look at possible avenues of capital raising for a small Limited Liability
Partnership
• Look at the cost of capital of each one of these methods
• Look for the net benefit of each of these methods
• Looking for the source of capital raising which would be best for a
small LLP in our given project.

3. Introduction
• Different companies under Companies Act, 2013
• About Limited Liability Partnerships
• Advantages and disadvantages of an LLP
• Administration, taxation, laws governing LLPs, auditing and winding
up

4. Limited Liability Partnerships
• Some or all partners have limited liabilities.
• Partners not responsible for other partner’s misconduct.
• Elements of both partnership as well as corporation.
• Have power to manage business directly.
• Formed and incorporated under LLP Act, 2008.
• Indian Partnership Act, 1932 doesn’t apply.
• Any individual or body corporate can be a partner in LLP.
• Shall use word LLP strictly after firm’s name.

5. Differences between LLP and pvt ltd firm

6. Differences between LLP and pvt ltd firm

7. Advantages of LLP
• No minimum capital requirement.
• No limit on maximum number.
• No need of compulsory audit, only if contribution exceeds Rs 25 lakhs
or annual turnover exceeds Rs 40 lakhs.
• Cost of registering low.
• Protects personal assets of partners from the liability of a business.
• More flexibility in internal organization culture.

8. Disadvantages of LLP
• Works on deed, so some partners may have more rights than other
partners.
• Incomplete compliances can lead to paying up more fines.
• Cannot raise money from public.
• Venture Capitalists generally avoid investing in LLP.

9. Organizational Overview

10. Learnovate Ecommerce Services
• Internship - They offer students and recent graduates the opportunity to gain
direct practical experience. They provide internship based on their services.
• WordPress - They design new themes as well as customize available according to
the customer need.
• Digital Marketing - Digital marketing is a broad field, including attracting
customers via email, content marketing, search platforms, social media, and
more.
• Design – They create visual content to communicate messages. They use different
tool for graphics designing.

11. Literature Review
S. no. Research paper About
1 A study of Limited Liability
Partnership (2018) – By Arunesh
Kumar Gupta
This paper discusses about diverse forms of business in brief and offers a look
at the limited liability partnerships, a focus on its merits and demerits, and
how an LLP is incorporated and how it is dissolved.
2 A study on determinants of capital
structure in India (2014) – By Anshu
Handoo and Kapil Sharma
This paper factors out the maximum crucial capital structure determinants of
850+ listed Indian corporations in both private as well as government
companies for the length 2001-2010. They have used regression analysis and
observed that the tradeoff between flexible equity sources and fiscal
discipline providing debt sources are far more important than any tax
advantages.
3 Perceptions of Small-Scale Firms
towards Bank Financing: An Empirical
Study (2017) – By Mandeep Kaur and
Ubique
This paper offers most important elements sorted by means of and
considered by way of small-scale corporations earlier than taking loans from
banks. Factor analysis turned into applied on primary data and found out
that so much documentation acts as a barrier in accessing financial
institution loans. Although they get, that leads to delays in sanctioning and
its miles a loss of merchandise and service delivery to customers for the small
enterprise, so they generally prefer funds from internal sources.

12. Literature Review
S.no. Research paper About
4 A systematic review of the field of
debt financing (2018) – By Umaru
Zubairu
This paper evaluates present literature on debt financing with an
objective to pick out gaps and it got approximately 9 elements which
acts as a primary roadblock for getting access to loans from financial
institutions and a requirement to focus on internal sources of
funding.
5 A Study on Venture Capital
Financing for Micro Small & Medium
Enterprises (MSME) in India (2015) –
By Prof. Vijayalakshmi, Dr. K.
Tirumalaiah and Mrs. W.R. Sony
This paper focusses at the scope and the situation of Venture Capital
funding, a type of equity financing, the benefits and policies of
Venture Capital for micro, small and medium enterprises and the
steps and methods in Venture Capital financing which will be the best
suited for the above type of enterprises.
6 Venture capital financing in India: an
analysis of problems and prospects
(2019) – By Akanksha Singh Fouzdar
and Vasudha Gupta
In this study the authors have described the intricacies and the
pitfalls of venture capital funding in India, issues, challenges,
fluctuations in Venture Capital funding due to reasons like high risk,
complexity in understanding, regulatory patterns, etc.

13. Literature Review
S.no. Research paper About
7 Choice between debt and equity and its
impact on business performance (2012)
– By Dr. Asma Salman and Nauman
Munir
This paper discusses and tries to offer knowledge on how firms pick
among equity and debt sources of funding and also throws light on the
decision’s impact on the commercial enterprise performance.
8 How much does Venture Capital really
cost (2017) – By Mike Walkinshaw
This research attempts to estimate the cost of Venture Capital funding
to the entrepreneur like return expectation, management cost, the
extra burden of the going to be failed ventures (8 out of 10), etc.
9 Proving Modigliani and Miller theories
of capital structure: The research on
Indonesia’s cigarette companies (2013)
– By Galuh Adika Alifani and Anggoro
Budi Nugroho
This paper holds that the Modigliani and Miller methods are
nevertheless relevant and holds properly that states that a company’s
capital structure is not a factor in its value but is determined by
present value of future earnings.
10 Venture capital and private equity
in India: An analysis of investments
and exists (2015) – By Thillai Rajan
Annamalai and Ashish Deshmukh
This paper factors out the crucial areas where India’s Venture Capital
funding sector lags behind, the significance of a strong domestic
Venture Capital funding ecosystem and the areas on which to work to
ensure a sustainable Venture Capital environment for quick and
smooth growth and sprawling of industries.

14. Research methodology
• Role of capital in business
• Capital structure of a firm
• Capital contribution in a firm
• Different ways of fundraising in an LLP

15. Ways of increasing Capital Contribution
1. Increasing existing partner’s capital
2. Adding new partners
3. Loans from partners
4. Bank loans
5. Venture capital fund raising

16. Increasing existing partner’s contribution
 Passing resolution for increase in Capital contribution.
 Passing resolution to amend LLP agreement.
 Amending LLP agreement with new capital contribution.
 Submitting new agreement to MCA within 30 days.

17. Adding new partners
 Passing resolution in LLP to add a new partner.
 Preparing a new LLP agreement with clauses.
 Execute LLP agreement on Bond with signature of partners.
 Submit form number 3 and 4 to MCA.
 Depositing funds in LLP current account.

18. Loans from partners
 Executing loan agreement.
 Mentioning repayment schedule.
 Mentioning other clauses.

19. Bank loans
List of documents required –
 Preparing Project Report
 LLP Agreement and Certificate
 LLP Shop Act certificate
 LLP PAN Card
 MSME Certificate
 Partner KYC
 Financial statements of LLP
 Bank statement of LLP

20. Venture Capital funding
Features of Venture Capital funding –
 High risk.
 Result diversification of ownership.
 Participation in Management by Venture Capitalist.
 May have funds repayment schedule.
 May have other financial cost.

21. What have I done ?
• Legal procedures of accessing each source of capital
• The cost of accessing each source of capital
• The advantages and disadvantages of each source of capital
• The challenges of proceeding with each source of capital

22. Data analysis and interpretation
List of formulas used –
Cost of equity = Rf+βs(Rm−Rf)
Cost of debt = (Total interest/Total debt) *(1-tax rate)
Equity capital cost –
10-year government bond rate as on 31st March, 2021 = Rf = 6.42%
Market risk premium Rm-Rf = 6.85%
Beta of online bookselling (by comparing with similar listed firm) = 0.8
Cost of equity = 6.42% + 0.8(6.85%) = 11.9% (approx. 12%)

23. Data analysis and interpretation
Cost of debt = (Total interest/Total debt) *(1-tax rate)
For loans by partners –
Maximum interest rate – 12% (Income Tax Act)
Corporate Income tax in India for turnover less than INR 4 billion in 2019/20 – 25%
Cost of debt = 12% (1-0.25) = 9%

24. Data analysis and interpretation
Loans from financial institutions –
Cost of debt = (Total interest/Total debt) *(1-tax rate)
Interest rate offered by banks – 8.25% onwards (SBI for simplified small business loan) for 60 months.
Corporate Income tax in India for turnover less than INR 4 billion in 2019/20 – 25%
Cost of debt = 8.25% (1-0.25) = 6.1875%

25. Findings and conclusion
• Loans from partners can be availed at lower rate of interest.
• The lowest interest rate of loans that banks offer (SBI 8.25%) can also
be agreed upon by partners.
• There are comparatively very less formalities and difficulties in getting
loans from partners as indicated by Mandeep Kaur (2017).

26. Managerial Implications
• Highlighting the importance of capital for a business.
• Study has been done by keeping a small Limited Liability Partnership in mind.
• Compares not only calculated financial costs but the other costs and challenges associated with
each of these methods.
• This study can be useful to young entrepreneurs who are not acquainted much with the concepts
of finance and market conditions despite having a good plan and execution strategy to proceed in
a particular direction when we are concerned about capital raising.

27. Limitations of study
• Only focused on one Limited Liability Partnership firm.
• Study is based on only secondary data.
• Study does not take into account the current performance of the firm.
• It is based on only current market rates and does not take into account the predicted future rates.
• Traditional methods of calculation of cost of capital have been used.
• Cash flow estimates were not available, so have not been used in the study.
• Not a comprehensive study on industry could be conducted.
• The study is based on assumptions.
• The study does not prove any hypothesis.
• The study does not cover the scenario of dissolution of the partnership firm.

28. Suggestions
• Collecting deep insights of the overall performance of the firm.
• Collecting primary data about the consequences of going with all the
capital sources.
• Predicting the scope of the online book selling industry.
• Predicting performance of the firm under normal, optimistic and
pessimistic conditions.
• Also using new methods to calculate cost of capital incorporating a
greater number of variables.

29. References
1. CC Prachi Prajapati, (2017) ‘What is allowable remuneration to partners in an
LLP’, LegalWiz
2. CA Nitish Kumar More, (2014) ‘All you want to know about LLP’, Tax Guru –
Complete tax solution
3. Bob Zider, (1998) ‘How Venture Capital Works’, Harvard Business review
4. Andrew Beattie, (2021) ‘Limited Liability Partnerships: the basics’, Investopedia
5. Limited Liability Partnership Act, 2008 by Ministry of Law and Justice
6. Femi Jebrina, (2018) ‘Capital Contribution by partners to LLP’, India Filings
7. CA AN Bhutada, (2021) ‘Learn Fundraising in LLP’, ANBCA
8. Shivani Jain, (2018) ‘Types of Companies under Companies Act, 2013: A
complete guide’, Swarit Advisors

30. Thank You