Limited Liability Partnership is a modernization form of partnership by giving the facility of a separate legal entity. A Limited Liability Partnership, popularly known as LLP combines the advantages of both the Limited Liability Company and Partnership into a single form of organization. Limited Liability Partnership has been introduced in India by way of the Limited Liability Partnership Act, 2008.
It gives operational ease to partners to manage the business and creates a system of accountability through the mandatory ROC filings.
In this globalization era, the introduction of the LLP concept is an exclusive benefit for entrepreneurs with little annual compliance.
Owing to the limited liability of partners, flexibility, low cost compliance, and many more it became a beneficial platform for small and medium entrepreneur to run their business in comparison with partnership businesses.
In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. This is an important difference from the traditional unlimited partnership under the Partnership Act 1890 , in which each partner has joint and several liability..
Notes:
- For all purposes of taxation (service tax or any other stipulated tax payment), an LLP is treated like any other partnership firm.
- Be limited to their agreed contribution in the LLP.
- Provisions have been made for corporate actions like mergers, amalgamations etc.
- The Registrar of Companies (Roc) shall register and control LLPs too.
Characteristics
- Separate legal entity: Like a company, LLP also has a separate legal entity. So the partners and the LLP in are distinct from each other.
- No requirement of minimum capital: In the case of companies there should be a minimum amount of capital that should be brought by the members or owners who want to form it. But to start an LLP there is no requirement of minimum capital.
- Minimum number of members: To start a limited liability partnership at least two members are required initially. However, there is no limit on the maximum number of partners.
- No requirement of compulsory audit: All the companies, whether private or public, irrespective of their share capital, are required to get their accounts audited. But in case of LLP, there is no such mandatory requirement. A limited liability partnership is required to get the audit done only if:
- If the contributions of the LLP exceeds 25 lakhs or
- If the annual turnover of the LLP exceeds 40 lakhs.
Rights & Duties of Partners & Designated Partners
Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.
Note: LLP shall be a body corporate and a legal entity separate from its partners.
Income Tax related Compliances:
Due dates for filing return of firm
- 30thSeptember, where accounts of the partnership firm are required to be audited under Income- tax Act or under any other law for the time being in force.
- 31st July in any other cases.
Due dates for filing of returns of partners
- 30th September in case of a working partner of a firm (whether or not he is entitled to remuneration) where due date for filing return of firm is 30th September.
- 31st July for other partners
Annual Compliances:
Every LLP would be required to file an annual return in Form 11 with ROC within 60 days of the closer financial year. The annual return will be available for public inspection on payment of prescribed fees to the Registrar.
An LLP shall be under obligation to maintain annual accounts reflecting the true and fair view of its state of affairs. A “Statement of Accounts and Solvency” in prescribed form shall be filed by every LLP with the Registrar within 30 days from the end of six (6) months of the financial year.
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