Limited Liability Partnership (LLP)
Limited Liability Partnership or LLP was introduced by Indian government though Limited Liability Partnership Act, 2008. LLP is an entity structure which is a mixture of private limited company and a partnership firm. But unlike the latter it is a separate legal entity and limits the liability of its partners.
LLPs need only 2 Designated Partners and a LLP Agreement to commence its business operations. The compliances under the LLP Act are fewer in number as compared to the compliances a Company has to make.
Advantages of LLP
An LLP has following advantages over Companies:
- The Companies Act, 2013 mandates minimum 4 Board Meeting every year with a maximum gap of 120 days between 2 Board Meetings. There is no such requirement under the LLP Act.
- Similarly, holding of Annual General Meeting (AGM) is mandatory for Companies whereas there is no such requirement for LLPs.
- Statutory Audit of accounts is mandatory for Companies in India whereas Statutory Audit is mandatory for LLPs if their turnover is more than INR 40 Lakhs or their contribution is more than INR 25 Lakhs.
Company can be converted into LLP:
A Company can be converted into LLP but a LLP cannot be converted into a Company.
Disadvantages of LLP
The major disadvantage of forming a LLP is that the cost of late filing of documents is very high. The LLP Act, 2008 provides for a fine of INR 100 per day till the time the offence of late filing continues. There is no cam on the maximum fine. Whereas, in case of late filings under the Companies Act 2013,a maximum of 12 times the normal filing fees has been prescribed.
FDI in LLP
The LLP Act 2008 also allows foreign national and foreign LLP’s to become partner in LLP. In the year 2011, the Government of India (GoI) allowed 100% FDI in LLPs with prior government approval. In the year 2015, the GoI further amended the FDI norms and now have allowed 100% FDI under Automatic Route in sectors where 100% FDI is allowed through Automatic route.
Assistance at bsamrishindia.com
We assist the client with the following: –
- Apprising the clients on complete details of current regulatory practices applicable to a particular business.
- Assisting the clients in preparing all the associated documents.
- Assisting the client in timely filing of documents for formation of LLP and subsequent annual disclosures as required under the LLP Act.
- Liaison with different regulatory authorities, departments and ministries.
- Application for all legal clearances, licenses and approvals as may be required in India.