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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 (LLP)
DNS Advisors
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
About LLP:
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
Limited Liability Partnership (LLP) is a corporate business vehicle that provides both the benefits of a company and partnership firm i.e. limited liability and allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.
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.
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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
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Minimum Alternative Tax (MAT) not applicable
Lower Tax LiabilityExample 1
Particulars Company LLP
Book Profits 2,00,000 2,00,000
Taxable Profits 50,000 50,000
Tax at normal rates (A) 15,000 15,000
Tax as per MAT (B) 36,000 NIL
Tax Payable (higher of A/B) 36,000 15,000
Residual Profits 1,64,000 1,85,000
Net Gain 21,000
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Particulars Company LLP
Book Profits 3,20,000 3,20,000
Taxable Profits 80,000 80,000
Tax at normal rates (A) 24,000 24,000
Tax as per MAT (B) 57,600 NIL
Tax Payable (higher of A/B) 57,600 24,000
Residual Profits 2,62,400 2,96,000
Net Gain 33,600
Example 2
Minimum Alternative Tax (MAT) not applicable
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Corporate Dividend Tax (CDT) not applicable
In the case of a company, if the owners to withdraw profits from company, an additional tax liability in form of CDT @15% (plus surcharge and Education Cess) is payable. However no such tax is payable in the case of Limited Liability partnership and profits of the firm 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
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Features Company LLP
Meetings
Quarterly Board of Directors meeting, annual shareholding meeting is mandatory
Not required
AuditCompulsory, irrespective of share capital and turnover
Required, if the contribution is above Rs.25 Lakhs or if annual turnover is above Rs. 40 Lakhs
Lower cost of formation
Lesser compliance requirements
Features Company LLP
Legal Cost to Incorporate having capital of Rs 1 lakh
Rs 8,000 Rs 2,500
Legal Cost to Incorporate having capital of Rs 5 lakh
Rs. 20,000 Rs. 4,000
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Easy to manage and also easy to wind up and dissolve
Features Company LLP
Dissolution Very proceduralLess procedural as compared to company.
Features Company LLP
Minimum Capital Contributions
Rs 1 lakh (for private Company)
Rs 5 lakh (for public company)No such mandatory requirement
No requirement of Minimum Capital Contributions
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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
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Conversion of private or unlisted public company into LLP:
Finance Act 2010: No Capital gain on Conversion
Transfer of capital assets on conversion of a private / an unlisted public company into a LLP as per the provisions of LLP Act, 2008 shall not be treated as transfer for the purpose of capital gains tax subject to following conditions
• 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
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
Contact us
DNS Advisors
Registered Office:
B - 2/259, Yamuna Vihar
New Delhi – 110053
Tel: 011 43658452
Corporate Office:
W-123 Greater Kailash II
New Delhi -110048
Contact Persons
Deepak Gupta
M +91 98113 00590
Naveen Goyal
M +91 99110 95297
Disclaimer: This document is prepared for information purposes only. No reader should act on the basis of any statement contained herein without seeking professional advice. The firm expressly disclaims all and any liability to any person who has read this, document or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.
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