The Companies Act,     1956
Limited Liability Partnership Act, 2008
Foreign Exchange Management Act, 1999 (FEMA):
For Bank & Financial     Institutions
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                                                    FAQs on LLP
What is mean by Limited Liability Partnership (LLP) ?
An LLP is a form of business organization which can provide the benefits of limited liability as in the case of a company and also allow its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.
Whether provisions of Indian Partnership Act, 1932 would be applicable to LLPs?
No, these shall not be applicable to LLPs.
What are the restrictions in respect of minimum and maximum number of partners in an LLP?
A minimum of two partners will be required for formation of an LLP. There will not be any limit to the maximum number of partners.
Whether a body corporate may be a partner of an LLP?
Yes, a body corporate can be a partner of an LLP.
In which manner a partner of an LLP can bring his contribution?
Partner’s contribution may consist of both tangible and/or intangible property and any other benefit to the LLP.
Whether other business entities like firm or company would be able to convert themselves into LLP?
Yes. A firm or private company or unlisted public company would be able to convert themselves into LLPs
Likely users / beneficiaries of the LLP Law?
The LLP framework could be used for many enterprises, such as:-
• Persons providing services of any kind
• Enterprises in new knowledge and technology based fields where the corporate form is not suited.
• For professionals such as Chartered Accountants (CAs), Cost and Works Accountants (CWAs), Company Secretaries (css) and Advocates, etc.
• Venture capital funds where risk capital combines with knowledge and expertise
• Professionals and enterprises engaged in any scientific, technical or artistic discipline, for any activity relating to research production, design and provision of services.
• Small Sector Enterprises (including Micro, Small and Medium Enterprises) Producer Companies in Handloom, Handicrafts sector
What are the Advantages of LLP?
a. Advantages over partnerships:
1.No personal liability
2.Being a separate legal entity it has a capacity to sue and be sued unlike in a partnership
3.It has perpetual succession and separate legal status.
b. Advantages over company :
1.No limit on maximum number of members and directors
2.No compliance regarding holding meeting of directors or members
3.No limit on minimum contribution like minimum subscription in company.
4.No compulsion on making and using common seal as is in a company.
5.Audit is compulsory only if turnover exceeds forty lacs or contribution exceeds twenty lacs
6.No need to maintain statutory register
7.Formation of LLP is comparatively a short and simple process than formation of company.
8.The filing fees for filing any document are less than that of the company.
Difference between LLP & a Company?
Following are the differences between LLP & a Company:-
• A basic difference between an LLP and a joint stock company lies in that the internal governance structure of a company is regulated by statute (i.e. Companies Act, 1956) whereas for an LLP it would be by a contractual agreement between partners.
• The management-ownership divide inherent in a company is not there in a limited liability partnership.
• LLP will have more flexibility as compared to a company.
• LLP will have lesser compliance requirements as compared to a company.
Difference between LLP & “traditional partnership firm”
Following are the differences between LLP & traditional partnership firm:-
• Under “traditional partnership firm”, every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner.
• Under LLP structure, liability of the partner is limited to his agreed contribution. Further, no partner is liable on account of the independent or un-authorized acts of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful acts or misconduct.
What are the basic requirements for formation of LLP?
Following are the basic requirements for formation of LLP:-
• Two Partners : At least two persons are required to be partners.
• Two Designated partners : Any two individuals, one of whom has to be resident in India can be a designated partner who will look after the working of the LLP.
• LLP Agreement : A LLP Agreement describing the rights and duties of partners, procedure for appointment or removal of partner / designated partner.
• Designated Partner Identification Number (DPIN) : An individual who intends to become a designated partner of a LLP has to obtain a DPIN.
• Digital Signature Certificate (DSC) : At least one partner or designated partner is required to obtain DSC for filing e-forms.
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