The document provides an overview of Limited Liability Partnerships (LLPs) under Indian law, including key aspects of the LLP Act 2008 such as incorporation, partners' relationships, taxation, foreign investment, and comparisons to other business forms. It discusses merits and demerits of LLPs, taxation implications on conversion to/from LLPs, and allows foreign investment in LLPs in sectors allowing 100% FDI.

1. LLP
Mohit &
Shailesh

2. 1 LLP
2 Brief Overview of LLP Act, 2008
3 Merits and Demerits of LLP
4 LLP v/s Other Forms
5 Taxation Aspects on LLP
6 Taxation Aspect on Conversion to LLP
7 FDI in LLP
8 Audit & Accounts of LLP
9 LLP v/s LLC

3. LLP
•A form of business organization which has been introduced in
India by way of LLP Act, 2008
•Which Combines the advantages of both the Company and
Partnership into a single form of organization
•LLP also limits the personal liability of a partner for the
errors, omissions, incompetence, or negligence of the LLP's
employees or other agents
•A separate legal entity

4. Brief Overview of LLP Act, 2008
•Chapter I – Preliminary
•Chapter II – Nature of LLP
•Section 3
•(1) - A LLP is a Body Corporate
•(2) - Shall have Perpetual Succession
•Section 4: The Partnership Act, 1932 is not applicable to LLP
•Section 5: Capability of becoming a partner in an LLP
(Unsound, insolvent)
•Section 6 (1): Every LLP shall have at least two partners

5. •Section 6(2): If at any time number of partners fall below 2 and
LLP carries on business for >6 months, then the partner carrying on
business (knowing the fact) is personally liable for the obligations
•Section 7
•(1): At least one partner should be resident of India
•IF partners are body corporate
•(2): Any partner may be admitted to or retired from a LLP in
accordance with LLP agreement

6. •Section 7
•(3): An individual shall not become a designated partner in any
LLP unless he has given his prior consent to act as such to the
LLP in such form and manner as may be prescribed
•(4): Every LLP shall file with the Registrar the particulars of
every individual who has given his consent to act as designated
partner in such form and manner as may be prescribed within
30 days of his appointment
•(5): An individual eligible to be a designated partner shall
satisfy such conditions and requirements as may be prescribed
•(6): Every designated partner of a LLP shall obtain a DPIN from
the CG

7. •Section 8: Designated partner responsible for doing all the
acts, matters and things to be done by LLP and Liable to all
penalties imposed on LLP for any contravention of the provisions
•Section 9: A LLP shall appoint Designated partner within 30 Days
of a Vacancy for any reasons
•Section 10:
•(1): If a LLP contravenes the provisions Section 7(1), LLP and
its every partner shall be punishable with fine – 25,000 to
5,00,000
•(2): If a LLP contravenes the provisions Section 7(4) & (5), 8
and 9, LLP and its partnership shall be punishable with fine –
10,000 – 5,00,000

8. Chapter III - Incorporation of Limited Liability Partnership And
Matters Incidental Thereto ( Section 11 – Section 21)
•LLP shall only be formed for carrying any business with profit motive
•That the incorporation documents shall contain the prescribed
information.
•Registrar on registration shall issue the necessary certificate of
incorporation
•Every LLP shall have a registered office to which all communications
and notices may be addressed and where they shall be received.
•The name of LLP shall end with words “LLP” or “Limited Liability
Partnership” as suffix.
•The LLP can also change its name
•LLP can apply to the CG for directing any other LLP registered with
similar nor identical name, to rectify its name.

9. Chapter IV - Partners And their Relationships (Section 22 to
Section 25):
•The mutual rights and duties of the partners of a LLP, shall be
governed by the LLP agreement.
•In the absence of agreement as to any matter, the mutual rights
and duties of the partners shall be determined by the provisions
relating to that matter as are set out in the First Schedule.
•LLP Agreement can also be amended.
•A partner can also cease to be partner of the firm
•Cessations , not by itself discharge the partner from any obligation
to the LLP or to the other partners or to any other person which he
incurred while being a partner the obligation for acts.
•Consent is necessary to become a partner in LLP

10. •Partner to notify change in address or name to the LLP , which in
turn will notify the same to the Registrar
•Any person ceasing to be partner of the LLP, can himself file the
intimation of his cessation to the Registrar of Companies
Chapter V - Extent & Limitations of Liability of LLP & Partners
(Section 26 to Section 31):
•The mutual rights and duties of the partners of a LLP, shall be
governed by the LLP agreement.
•In the absence of agreement as to any matter, the mutual rights
and duties of the partners shall be determined by the provisions
relating to that matter as are set out in the First Schedule.

11. •LLP Agreement can also be amended.
•A partner can also cease to be partner of the firm
•Cessations , not by itself discharge the partner from any obligation
to the LLP or to the other partners or to any other person which he
incurred while being a partner the obligation for acts.
•Partner to notify change in address or name to the LLP , which in
turn will notify the same to the Registrar
•Consent is necessary to become a partner in LLP
•Any person ceasing to be partner of the LLP, can himself file the
intimation of his cessation to the Registrar of Companies

12. Chapter VI – Contributions (Section 32 to Section 33):
•A contribution of a partner may consist of tangible, movable or
immovable or intangible property or other benefit to the limited
liability partnership.
•The obligation of a partner to contribute shall be as per the limited
liability partnership agreement
•Chapter VII – Financial Disclosures (Section 34 – Section 41)
•The LLP shall maintain such proper books of account as may be
prescribed.
•Prepare & file within 6 months of end of the FY a Statement of
Account and Solvency with Registrar of Companies

13. •Statement of Account and Solvency will be signed by the
Designated Partners
•Prepare & file within 60 days of end of the financial year an
Annual Return with the Registrar of Companies.
•The documents filed with ROC shall be available for public
inspection.
•Central Government can compound offence punishable with fine
only.
Chapter VIII - Assignment and Transfer of Partnership Rights
(Section 42):
•The rights of a partner to a share of the profits and losses of the
limited liability partnership are transferable either wholly or in part.
•Transfer does not entitle the partner to participate in the
management or the conduct of the activities of the LLP.

14. •Chapter IX – Investigation (Section 43 – Section 54):
•The CG shall appoint one or more competent persons as
inspectors to investigate the affairs of a LLP and to report thereon
in such manner as it may direct if—
(a) the Tribunal
(b) on an application received from >1/5th of the total number of
partners LLP, by order, declares that the affairs of the LLP ought to
be investigated; or
(c) any Court, by order, declares that the affairs of a LLP ought to be
investigated.
•The CG may appoint one or more competent persons as inspectors
to investigate the affairs of a LLP.

15. Chapter X - Conversion to LLP (Section 55 to Section 58)
Chapter XI - Foreign Limited Liability Partnerships (Section 59)
•The CG may make rules for provisions therein by applying or
incorporating, with such modifications, as appear appropriate
Chapter XII - Compromise or Arrangement of Limited Liability
Partnerships
•LLP can enter into compromise or arrangement with its creditors
or the partners

16. •Consent of 3/4th in value of the partners or creditors will be
required
•An application is required to be filed with the High Court for any
compromise or arrangement.
Chapter XIII - Winding Up and Dissolution (Section 63 – Section 65)
•A LLP can be wound up either voluntarily or by the order of tribunal
•The Act prescribes the circumstances under which the LLP can be
wound up compulsorily by the High Court.

17. Merits of LLP
•Renowned form of business
•Easy to Form
•Body Corporate ( Separate Legal Entity)
•Limited Liability
•Perpetual Succession
•Flexible to Manage
•Easy Transferable Ownership
•Capacity to sue
•Lesser Compliances

18. Demerits of LLP
•Any act of the partner without the other partner, may bind
the LLP
•Under some cases, liability may extend to personal assets of
partners.
•Cannot raise money from Public.

19. LLP v/s Other Forms
Category Partnership Company LLP
Common Seal r a Depends
Cost of Negligible Minimum Statutory 800 Only
Formation Fees
Pvt. Co. – 6,000
Public Co. – 9,000
Separate Legal
Entity and
r a a
Perpetual
Succession
Evidence of Partnership Share Certificate LLP
Ownership Deed Agreement

20. Category Partnership Company LLP
Applicability of Not Applicable Compulsory The necessary
Accounting rules in this regard
Standards not yet issued.
Annual Filing Not Required With ROC With Registrar of
LLP
Dissolution Agreement, Voluntary or by Voluntary or by
Mutual order of National order of National
Consent, or by Company Law Company Law
Court Order Tribunal. Tribunal.
Creation Created by Created by Law Created by Law
Contract
Principal / Agent Partners are The directors act Partners act as
Relationship agents of the as agents of the agents of LLP and
firm and other company and not of the other
partners. not of the partners.
members

21. Category Partnership Company LLP
Annual Filing Not Required With ROC With Registrar of
LLP
Whistle Blowing No Such No Such Provision made to
Provision Provision protect
employees &
Partners
Prevailing Law The Indian The Companies The LLP Act, 2008
Partnership Act, Act, 1956
1932
Contracts with Partners are free Restrictions on Partners are free
Partners / to enter into any Board regarding to enter into any
Director contract. some specified contract.
contracts, in
which directors
are interested.

22. Taxation Aspect on LLP
•LLP will be treated as Partnership firms for the purpose of
Income Tax and will be taxed like a partnership firm.
•Section 40(b) : Interest to partners, any payment of salary,
bonus, commission or remuneration allowed as deduction in
the hands of Partnership firm
•LLP not covered under presumptive taxation

23. Section 184
Section 184: In order for Limited Liability Partnership to be assessed as
firm as Income Tax Act, it has to satisfy the following criteria:
•The LLP is evidenced by an instrument.
•The individual shares of the partners are very clearly specified in the
deed
•A certified copy of LLP Agreement must accompany the return of
income of the LLP of the previous year in which the partnership was
formed (If LLP Agreement amended, submit return of income with LLP
agreement)
•No Failure on the part of LLP while attending notices given by ITO

24. What happens if section 184 is not
complied by firms?
•Section 185 applies to the LLP
•Section 185:
When section 184 is not complied with, the
consequence is that no deduction towards interest and
remuneration is allowed. This is the mandate of the
section 185.

25. Taxation aspect on Conversion to LLP
•Capital Gain on conversion of Partnership into LLP
•No tax implication
•If the rights and obligation of the partners remain
the same after conversion
•If there is no transfer of any asset or liability after
conversion
•If there is a violation of these conditions , the provision of
capital gain will apply.

26. Capital Gain on conversion of
Company into LLP
•Any transaction concerning transfer of a capital asset or
intangible asset by a Private Company or unlisted Public
Company to a Limited Liability Partnership
•As a result of conversion of the company into a LLP in
accordance with the provisions of section 56 or section 57 of
the LLP Act, 2008
•Would be exempted from the provision of Capital Gain
Tax, , only if the following conditions are satisfied :

27. •All the assets and liabilities of the Company immediately
before the conversion shall become the assets and liabilities of
the LLP
•All the shareholders of the Company immediately before the
conversion shall become the partners of the LLP and their
capital contribution & PSR in LLP should remain in the same
proportion as their shareholding in the company on the date
of conversion
•The shareholders of the company do not receive any
consideration or benefit, directly or indirectly, in any form or
manner, other than by way of share in profit and capital
contribution in the limited liability partnership

28. •The aggregate of the PSR of the shareholders of the company in the
LLP shall >50% at any time during the period of 5 years from the date
of conversion
•The turnover in business of the company in any of the 3PPY in which
the conversion takes place does not exceed 60 Lakhs
•No amount is paid, either directly or indirectly, to any partner out of
balance of accumulated profit standing in the accounts of the
company on the date of conversion for a period of 3 years from the
date of conversion.
•If conditions not satisfied, profits taxed as deemed profits

29. Carry forward and set off of accumulated loss and
unabsorbed depreciation allowance, on
conversion into LLP and
Amortization of expenditure incurred under
Voluntary Retirement Scheme
•Conversion of a Private Company or unlisted Public Company
to Limited Liability Partnership;
•Compliance of conditions laid down under 47(xiiib) –
Benefit of Carry forward and Setoff and amortization
allowed
•Non-compliance of conditions laid down under 47(xiiib)
– No benefit of Carry forward and Set off and amorization

30. Benefit of tax credit in respect of Minimum
Alternate Tax (MAT) paid by the Company
•Any benefit of the MAT credit in hands of Private Company or
unlisted Public Companies will not be continued in the hands
of successor LLP

31. FDI in LLP
•Allowed –
•LLPs with FDI will be allowed, through the Government
approval route, in those sectors/activities where 100% FDI
is allowed, through the automatic route and there are no
FDI-linked performance related conditions.
By FDI-linked performance related conditions, it is meant
that in sectors, where conditions like minimum
capitalization etc are prescribed like development of
Townships, NBFC, even though 100% FDI is allowed under
automatic route, LLP’s will not be allowed to bring FDI with
the approval of Government of India.

32. •Not Allowed –
•To operate in agricultural/plantation activity, print media
or real estate business
•LLP having FDI, cannot make further investment in LLP or
companies engaged in any business
•Funding of LLP:
•Allowed:
•Downstream investment by company
•Investment by Cash Considerations
•Not Allowed: FII’s, Foreign Venture Capitalists and ECB’s

33. •Ownership and management of LLPs
•Determination of Designated Partner:
•At least one designated partner shall be person
resident in India
•Body Corporate as Designated Partner:
•Registered under The companies act, 1956

34. Tax on LLP (Summary)
•LLP’s will be treated as Partnership Firms for the purpose of
Income Tax w.e.f assessment year 2010-11
•No surcharge will be levied on income tax.
•Profit will be taxed in the hands of the LLP and not in the
hands of the partners.
•Minimum Alternate Tax a nd Dividend Distribution Tax will
not be applicable for LLP.
•Remuneration to partners will be taxed as “Income from
Business & Profession”.
•No capital gain on conversion of partnership firms into LLP.

35. •Designated Partners will be liable to sign and file the Income
Tax return.
•LLP shall not be eligible for presumptive taxation.
•Capital Gain on conversion of Company into LLP will be
exempt from tax, if prescribed conditions are complied with.
•On conversion, the successor LLP , will be allowed to carry
forward and set off of accumulated loss and unabsorbed
depreciation allowance
• On conversion, the successor LLP will be allowed to amortize
the expenditure incurred under voluntary retirement scheme
On conversion, the successor LLP will not be allowed to take
the credit of MAT paid by the predecessor company.

36. Accounts of LLP
•LLP has to maintain books of accounts as prescribed in Rule
24 of LLP Rules
•These books to be retained for 8 years
•Either on Cash or on Accrual Basis
•The accounting year of each LLP must end on 31st March ( LLP
cannot choose accounting year ending on any other date)
•It has to prepare statement of accounts and solvency
statement on or before 30th September each year (To be
signed by designated partners)

37. Audit of LLP
•To be audited by a CA in accordance with rule 24 of LLP Rules
•Audit is compulsory if:
•Contribution exceeds 25Lakhs or;
•Turnover exceeds 40Lakhs
(No specific form of audit report is required to be given)
•Appointment of Auditor:
•Appoint auditors within 30 Days before the end of each FY
•If 1st FY, appointment to be done before the end of first FY

38. Annual Return Compliance
•LLP has to file an annual return with ROC
•On or before 30th May each year
•In form no. 11 with the prescribed fees

39. LLP V/s LLC
Basis of Difference LLP LLC
Formation Easier to from than Most states require
LLCs filing of articles of
organization and other
docs
Paperwork Partnership agreement Operating agreement
to be drafted along with company
bylaws to be drafted
Size Minimum of 2 LLCs may be single
partners required member operated.

40. Basis of Difference LLP LLC
Reduced Liability Personal creditors can Biz creditors cannot go
seize the business after personal assets
assets; to recover debts
likewise, business
creditors can seize
personal assets
Profession(Business) LLPs are more likely to LLCs are more likely to
consist of consist of Small/mid
Professionals(CAs, sized owners.
Lawyers etc…)

41. Thank
YOU
Mohit &
Shailesh