Presentation on

LIMITED LIABILITY
PARTNERSHIP (LLP) ACT,
2008

- by CA. Sujit
S. T. MODIModi
&
CO.
CHARTERED
ACCOUNTANTS
 Introduction

Ω The Limited Liability Partnership (LLP) Act,

2008 has come into force with effect from 9th
January 2009

Ω This Act contains provision for formation &

regulation of LLP & for matters connected
therewith or incidental thereto

Ω LLP is an alternative form of business structure

that bridges the gap between traditional form of
partnership & limited liability company

Ω ItS. has
T. MODIcombined
& advantage of organizational
CO.
flexibility based on a mutual agreement with
CHARTERED
ACCOUNTANTS
 Nature of LLP

Ω An LLP is a body corporate having a legal entity

separate from its partners & shall have
perpetual succession

Ω Any change in the partners of an LLP shall not

affect the existence, rights or liabilities of the
LLP

Ω An LLP can be formed to carry on a lawful

business, which has been defined to include any
trade, business or profession

Ω An
S. T.LLP
MODIcan
& sue, be sued, acquire, own, hold,
CO.
develop or dispose of property in its own name
CHARTERED
ACCOUNTANTS
 Nature of LLP ….contd

Ω An LLP possess a common seal & do such acts

as bodies corporate may lawfully do

Ω The liabilities of an LLP would be met out of the

property of the LLP

Ω Unless specifically provided, the provisions of

Indian Partnership Act, 1932 shall not apply to
an LLP

S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Partners

Ω An individual capable of becoming a partner or a

body corporate can become a partner in an LLP

Ω A body corporate includes an LLP (Indian or

Foreign) & Company (Indian or Foreign) but
specifically excludes a Co-operative Society

Ω Every LLP shall have at least two partners &

there is no restriction on the maximum number
of partners

Ω There must be two `designated partners` who

are
S. T.individuals
MODI & & at least one of them should be
aCO.
resident in India
CHARTERED
ACCOUNTANTS
 Partners …. contd

Ω Every Designated Partner needs to obtain Designated

Partner Identification Number ( DPIN ) from the Central
Government

Ω Designated Partner is responsible for all compliances as

required under the LLP Act & is liable to penalty for any
contraventions

Ω Every Designated Partner would be required to sign the

Annual Financial Statement, Annual Solvency Statement &
Annual Return

Ω Cessation of Partnership shall be in accordance with the

agreement or by giving thirty days prior written notice to all
the partners
S. T. MODI &
CO.
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 Incorporation

Ω At the onset, the partners would be required to

enter into a partnership agreement in writing,
which would be filed with ROC

Ω ROC would register the incorporation documents

& issue Certificate of Incorporation within
fourteen days on completion of formalities

Ω Every LLP shall have either the words ‘limited

liability partnership’ or the acronym ‘LLP’ as the
last words of its name

Ω LLP
S. T. being
MODI & an independent & distinct entity
CO.
separate from its partners it can also have
CHARTERED
ACCOUNTANTS
 Partners & Their Relations

Ω Every Partner of an LLP will be, for the purposes of the

business of the LLP, the agent of the LLP but not that of
other partners

Ω The mutual rights & duties of partners inter se & that of LLP
& its partners would be governed by the LLP agreement

Ω Revised agreement shall be filed with ROC to effect changes

in name, object, place, business, partners admission or
resignation, etc

Ω In absence of LLP agreement , mutual rights & duties of

partners would be determined as set out in the First
Schedule to the Act
S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
First Schedule – Key points

Ω All partners of an LLP would be entitled to share

equally in the capital, profits & losses of the LLP

Ω No partner would be entitled to remuneration for

acting in the business or management of the LLP

Ω Every partner may take part in the management

of the LLP

Ω No person may be introduced as a partner

without the consent of all the existing partners
S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
First Schedule – Key points ….
contd
Ω Any matter relating to LLP shall be decided by a
resolution passed by majority of partners & each
partner shall have one vote for this purpose

Ω No change can be made in the business of LLP

without consent of all the partners

Ω Decisions taken by LLP shall be recorded in the

minutes within thirty days of taking such
decisions & shall be kept & maintained at the
registered office of the LLP

S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Partners Liability

Ω Unlike traditional form of partnership, the liability

of each partner in LLP will be limited to the
extent of the amount specified in the LLP
agreement

Ω A partner is not personally liable, directly or

indirectly for an obligation of the LLP, whether
arising in contract or otherwise solely by reason
of being a partner of the LLP

Ω A partner of LLP would not be liable for any other

partner’s wrongful act or omission
S. T. MODI &
Ω CO.
Liabilities of LLP shall be met out of the property
CHARTERED
ACCOUNTANTS
 Accounts & Audit

Ω LLP will be required to maintain certain books of accounts as

may be prescribed either on cash basis or accrual basis of
accounting

Ω The accounts of the LLP shall be audited in accordance with the

rules as may be prescribed under the Act

Ω Annual Return will be filed with ROC within sixty days of the end
of the financial year

Ω Statement of Account & Solvency signed by designated partners

will be filed with ROC within six months from the end of the
financial year
S. T. MODI &
CO.
CHARTERED
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 Assignment & Transfer of
Rights
Ω The rights of a partner to share in the profits &
losses of the LLP & to receive distributions would
be transferable in accordance with the LLP
agreement either wholly or in part

Ω The transfer of any rights by any partner would

not by itself cause the disassociation of the
partner or a dissolution & winding of an LLP

Ω The transfer of rights does not confer rights of

participation in the management, conduct of
activities or access transactions to the transferee
or
S. assignee
T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Conversion Opportunity

Ω Existing entities like partnership firms or

companies’ may apply to convert to LLP

Ω A firm may apply to convert to LLP

provided;
ü all the partners of the firm become the partners of
LLP

Ω A private or an unlisted public

company may apply for converting
itself into an LLP provided;
S. T. MODI &
ü There is no security interest subsisting in assets of
CO.
the company at the time of making an
CHARTERED
ACCOUNTANTS
Compromise, arrangement
or reconstruction of LLP
Ω LLP Act provides provisions for allowing
compromise or arrangement including mergers
and amalgamations, winding up and dissolution
of LLP

Ω These should be agreed by majority of members

& creditors representing three-fourths in value &
confirmed by National Company Law Tribunal
(NCLT)

Ω Winding up or Dissolution of LLP may be either

voluntary or by the NCLT under circumstances,
like;
S. T. MODI &
CO.
ü Inability to pay debts
CHARTERED
ü Default in filing Statutory documents consecutively
ACCOUNTANTS
 Issues to resolve !!!

Ω Ministry of Corporate Affairs is yet to notify the

Rules for carrying out the provisions of the Act

Ω LLP Act is silent on the taxability of LLP hence

appropriate amendment to the Income Tax Act
1961 to provide guidance

Ω Synchronization between Partnership Act

administered by State Government with LLP Act
which is a Central legislation

Ω Exchange Control Guidelines may be amended to

include
S. T. MODIForeign
& Companies in such form of
CO.
organization structure
CHARTERED
ACCOUNTANTS
 Company vs LLP
Distinction
Company LLP
Incorporation Document is required to be
Memorandum is to be filed with ROC
filed.
Incorporation Document is not required to
contain State in which incorporated. Thus,
Memorandum should contain State in
registered office can be changed to any
which incorporated.
place in just by informing ROC subject to
prescribed conditions.
Name to contain 'Limited' or 'Private Name to contain 'Limited Liability
Limited' as suffix Partnership' or 'LLP' as suffix
LLP Agreement is required to be filed later.
Articles are to be filed at the time of
In absence of LLP Agreement, mutual
incorporation. Private company must have
rights and duties will be as specified in
Articles. In case of public company,
first schedule to LLP Act. Thus, practically,
provisions of Table A apply if there are no
each LLP must have LLP Agreement,
Articles.
though not mandatory.
Designated Partner to look after statutory
compliances. Otherwise, all partners can
look into affairs of the LLP. However, LLP
Managing Director and Wholetime Director
can delegate powers to some partners
to look after day
S. T. MODI & to day administration..
who may be designated as 'Managing
CO. Partner', or 'Executive Partner' or any
CHARTERED other name.
ACCOUNTANTS
 Company vs LLP
Distinction … contd
Company LLP
Individual director or member does not Every partner has authority to conduct
have authority in conduct of business of business of LLP, unless the LLP Agreement
company. provides to contrary.
No restriction on remuneration to partner.
Restrictions on remuneration to director as
Remuneration should be provided in LLP
per Companies Act
agreement.
A partner who has resigned from LLP can
Notice of change of director is to be given
himself file notice of his resignation to
by company.
ROC.
No requirement of share and share
Share, share certificate, register of
certificate. Hence, no question of its issue,
members, transfer and transmission of
allotment, transfer, rectification of register
shares etc. required.
etc.
No provision for regular meeting of Board
and members. Partners can decide when
Board meetings, general meetings are
and how to meet, delegation of powers
required.
etc. Provision is made that LLP should
maintain minute book

S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Company vs LLP
Distinction … contd
Company LLP

Charges are required to be registered No provision for registration of charges.

Elaborate records and registers are No records and registers have been
required to be maintained prescribed.
Restrictions on Board regarding some
specified contracts, contracts in which Partners are free to enter into any
directors interested, investments, loans contract.
and guarantees to other companies
No requirement of disclosures required of
Disclosures required of contracts where
contracts where partners are interested,
directors are interested
unless specified in LLP Agreement.
Elaborate provision relating to redressal in No provision relating to redressal in case
case of oppression and mismanagement of oppression and mismanagement
No specific provisions relating to nidhis,
Specific provisions relating to nidhis, NBFC
NBFC
S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Company vs LLP
Similarities
Company LLP

Limited liability and perpetual succession Limited liability and perpetual succession

Must have common seal Common seal is optional

Provision of approval of name, change of Provision of approval of name, change of

name are similar. name are similar.

ROC is the administrative authority ROC is the administrative authority

Provisions of name, its approval and Provisions of name, its approval and
change are similar. change are similar.
S. T. MODI &
CO.
CHARTERED
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 Company vs LLP
Similarities … contd
Company LLP
No personal liability of individual director
or member [except of director of private No personal liability of partner, except in
company in some cases like income tax case of fraud.
and sales tax dues].
Complicated procedure for change of Simple procedure to change registered
registered office, particularly when change office of LLP anywhere in just by informing
is to other State ROC and following prescribed conditions.
Registrar of Companies (ROC) is the Registrar of Companies (ROC) is the
administrating authority. administrating authority.
Incorporation document, details of
Memorandum and Articles, details of
partners, accounts, statement of solvency
directors, accounts, annual return, special
and annual return filed by LLP with ROC
resolutions etc. filed by LLP with ROC will
will be available for public inspection
be available for public inspection
[clause 36 of LLP Bill, 2008]
Powers to Central Government to inspect Powers to Central Government to inspect
records of company and to order records of company and to order
investigation investigation

S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Company vs LLP
Similarities … contd
Company LLP

Provisions of compromise, arrangement or Provisions of compromise, arrangement or

reconstruction of companies are similar reconstruction of LLP are provided in Act

Company can be would up voluntarily or LLP can be would up voluntarily or by

by order of Court order of Court

ROC can strike off name of defunct

ROC can strike off name of defunct LLP
company.

S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Traditional Partnership
Firm vs LLP
Distinctions
Traditional Partnership LLP

Unlimited personal liability of each partner

No personal liability of partner, except in
for dues of the partnership firm. Personal
case of fraud.
property of each partner also liable.

Written agreement not essential. Incorporation document essential.

Partnership can be registered under

Partnership Act. Registration is not
mandatory.
Not a legal entity separate from its
partners
LLP is incorporated under LLP Act.
Incorporation is mandatory.
It is a legal entity separate from its
partners, having perpetual succession

Property cannot be held in name of

Property can be held in name of LLP.
partnership firm.

S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Traditional Partnership
Firm vs LLP
Distinctions … contd
Traditional Partnership LLP

'Incorporation Document' is required to be

Partnership deed/agreement is executed. executed. In addition, LLP Agreement is
Even verbal agreement is valid. required in almost all cases, though such
LLP agreement is not mandatory.

Documents are required to be filed with Registrar of Companies (ROC) is the

Registrar of Firms (of respective State) administrating authority.

Death of partner dissolves a firm, in

Death of partner does not dissolve LLP.
absence of agreement

Minimum two and maximum twenty Minimum two partners. No limit on

partners maximum number of partners
Each partner can take part in business of
Each partner can take part in business of
firm, but LLP Agreement can provide to
firm.
the contrary.
S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Traditional Partnership
Firm vs LLP
Distinctions … contd
Traditional Partnership LLP
Only designated partners are liable for
All partners are liable for statutory statutory compliances as are required
compliances under Partnership Act under LLP Act (not necessarily in respect
of other Acts).
Partner cannot enter into business with Partner of LLP can enter into business with
firm, though he can give loan to firm. LLP. He can also give loans to LLP.
Every partner of LLP is agent of LLP but
Every partner of firm is agent of firm and
not of other partners. Thus, he can bind
also of other partners. He can bind
LLP by his acts but not other partners.
partnership firm as well as other partners
However, LLP agreement can restrict
by his acts.
powers of individual partner.
Filing of accounts, statement of solvency Filing of accounts, statement of solvency
and annual return not required. and annual return not required.
Partnership can be 'at will' i.e. any partner Individual partner can resign but cannot
can resign or dissolve firm dissolve the LLP.
S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Traditional Partnership
Firm vs LLP
Distinctions … contd
Traditional Partnership LLP

Death of partner dissolves partnership

Death of partner does not dissolve LLP.
unless there is contract to contrary
Filing of return of retirement of partner
Public notice is required for retirement of a
with ROC is required, but no provision for
partner.
public notice of retirement of partner.

Partnership firm can be dissolved. LLP can be would up.

No specific provision to enter into

LLP can enter into compromise,
compromise, arrangement, amalgamation,
arrangement, amalgamation,
reconstruction etc. This can be done only
reconstruction etc.
under civil laws.
There is no specific provision to admit
Minor can be admitted to benefit of
minor to benefit of partnership. It is
partnership.
doubtful if this can be done.
S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Traditional Partnership
Firm vs LLP
Similarities
Traditional Partnership LLP

Partner is not employee of firm Partner is not employee of LLP.

Liability of a person for 'holding out', i.e. Liability of a person for 'holding out' i.e.
representing himself as partner, though herepresenting himself as partner, though he
is not is not

Partner of firm entitled to remuneration Partner of LLP entitled to remuneration

only if partnership agreement so provides only if LLP agreement so provides

New partner can be introduced only with

New partner can be introduced only with
consent of all existing partners, unless LLP
consent of all existing partners
Agreement provides otherwise.

Insolvent person cannot continue as Insolvent person cannot continue as

partner of firm. partner of LLP.
S. T. MODI &
CO.
CHARTERED
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 Traditional Partnership
Firm vs LLP
Similarities … contd
Traditional Partnership LLP

Insolvent person cannot continue as Insolvent person cannot continue as

partner of firm. partner of LLP.

Rights of partnership can be assigned. Rights of partnership can be assigned.

Partner liable to firm for any personal Partner liable to LLP for any personal
profits made by him by use of property, profits made by him by use of property,
name or business connection of firm. name or business connection of LLP
Partner cannot undertake competing
Partner cannot undertake competing business without consent of LLP.
business without consent of other partners Otherwise, liable to account for and pay
profits to LLP

Partner liable to firm if he commits fraud. Partner liable to LLP if he commits fraud.

S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
 Disclaimer

Ω The information in this document is private and confidential and is only

intended for use by the addressee and access to this document by anyone
else is unauthorized

Ω Any unauthorized disclosure, reproduction, distribution, copying, use or

dissemination either in whole or in part is strictly prohibited

Ω Due care has been taken in compiling the information & preparing this
document, however S. T. MODI & CO. does not accept any liability for
errors & omissions arising in the document

Ω Reader is advised to take action contained in this presentation only after

consultation with an advisor
S. T. MODI &
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CHARTERED
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THANK YOU

S. T. MODI &
CO.
CHARTERED
ACCOUNTANTS
A-57/1198, Veera Desai Road,

Andheri West, Mumbai – 400058

Call : 26770691, 9869238837

Email : sujitmodi@yahoo.com