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LLP

NARESH S.SHAH & C
(NSC),
Chartered Accountants, Mumbai 

Our main team - CA Naresh Shah (Father)
CA Nikunj Shah (son) & CA Kunjan Shah (son)

We are usually always online for chat / interaction on gtalk or skype id kunjan.naresh.shah  
OR
 call us on 022-64500000
OR 
add us on Gtalk messenger gtalk id contact@canaresh.com 

Location has little relevance, in age of internet. 

\
CA Kunjan N.Shah 


Click here if you  want to make a private or public limited company.

LLP - Steps to form LLP is attached below on 

bottom of this page as pdf file





-         (Disclaimer - Below is a general write up prepared on 1st Nov, 2012 for overall guidance only. Please consult before relying on same)

-        www.CAnaresh.com

-        Naresh Shah & Co (NSC)

-        CA Naresh Shah - 02264500000

BASIS OF DIFFERENCE

Partnership firm

COMPANY

LLP

Registration

Optional with the registrar of `firms

Compulsory with ministry of corporate affairs

Compulsory with ministry of corporate affairs

Documentation

 

Partnership deed

Memorandum articles to be filed with ROC

Incorporation Documents (LLP agreement etc) is required to be filed.

Minimum no

2

2

2

Maximum

10 or 20 (depending on banking activity)

50

No limit

DSC

Not compulsory but preferable to have

Required

Required

Compliance

Managing partners

Designated partners

Directors/secretary

Nomenclature

No words, generally M/s. stated at start

Name to contain 'Limited' or 'Private Limited' as suffix

Name to contain 'Limited Liability Partnership' or 'LLP' as suffix

Submission of main documents regarding LLP

Partnership deed to be made and registered with Registrar of firms

Articles are to be filed at the time of incorporation. Private company must have Articles. In case of public company, provisions of Table A apply if there are no Articles.

LLP Agreement is required to be filed later. In absence of LLP Agreement, mutual rights and duties will be as specified in first schedule to LLP Act. Thus, practically, each LLP must have LLP Agreement, though not mandatory.

Management of the Firm

Generally Working Partners have full powers

Individual director or member does not have authority in conduct of business of company.

Designated Partner to look after statutory compliances. Otherwise, all partners can look into affairs of the LLP. However, LLP can delegate powers to some partners who may be designated as 'Managing Partner', or 'Executive Partner' or any other name.

Remuneration

It is restricted as per 40(b) of I. tax Act, 1961

 

Taxed as business income in hands of recipient partner

No Restrictions on remuneration to director for pvt.ltd company as per Companies Act.

 

Remuneration taxed as salary in hands of recipient partner

It is restricted as per  40(b) of I. tax Act, 1961

 

Taxed as business income in hands of recipient partner

Interest

Maximum limit - Interest restricted as per 40(b) of Income tax act, 1961

 

Taxed as business income in hands of recipient partner

Maximum limit - No Restrictions on Interest to director for pvt.ltd.company as per Companies Act.

 

Remuneration taxed as salary in hands of recipient partner

Maximum limit - It is restricted as per  40(b) of I.tax Act, 1961

 

 

Taxed as business income in hands of recipient partner

8% presumptive taxation law

Applicable

Applicable

Not-applicable

Basic Income Tax rate (excluding sur/cess)

30%

30%

30% (no surcharge for LLP)

Alternate tax (alternate to basic tax stated above)

Nil

Its called Mat. Mat rate 18% + applicable surcharge/cess

 

Applicable only if tax payable as per normal tax is less than mat

Companies are liable to mat on exempt incomes like long term gains & dividned income.

Here, its called AMT. rate 18% + applicable cess. Surcharge not applicable to LLP

 

Where regular tax is less than amt,  adjusted total income (ATI), ATI will be total income and tax will be payable on this ATI

ATI is normal income plus chapter VI(c)  & 10AA deductions (for seepz etc)

LLP not liable to pay AMT on income exempt from tax

Governing law in taxation

Income tax act

Income tax act

LLP will be treated as partnership firm under Income tax act, 1961

TDS on remuneration  to partner/director

No

Yes

No

TDS on interest to partner/director

No

Yes

No

Deemed dividend / repatriation / withdrawal

No Dividend distribution tax (DDT)

Loan to directors/related parties may invite income tax on dividend called DDT (which is currently 15% plus applicable sur/cess)

NO DDT as such. Prima facie, withdrawal from LLP is easier than company.

NRIs can invest?

Yes, but on non-repatriation basis

NRI & Non-NRIs can invest (no compulsory need of any Indian resident)

Yes, but one resident is required

Raise public issue?

No

Yes

 No

Status in eyes of stake holders, banks etc.

Not as high

Highest

Medium

FDI

Not possible on repatriation basis

Possible except in agricultural, real estate business,etc

Possible except in agricultural, real estate business and cases where conditions to be satisfied are not permitted, etc.

Provision relating to Redressal (example- oppression on minority shareholders etc)

No such provision generally required

Elaborate provision relating to redressal in case of oppression and mismanagement

No provision relating to redressal in case of oppression and mismanagement. Generally, other laws of natural justice have to be resorted to in this case.

 

Specific Provision for nidhis/NBFC etc.

 

None in general

 

Specific provisions relating to nidhis, NBFC

 

No specific provisions relating to nidhis, NBFC

Liability of partners

As such, unlimited liability

Generally, joint and several liability

 

Generally, upto paid up share capital

Partners are not liable for each other’s act, There is no concept of joint and several liability.

Personal liability

Generally yes

Generally no personal liability

Generally no personal liability

Public inspection of yearly accounts

Accounts cannot be inspected as such.

Accounts can be inspected on mca portal by paying small Rs.50

Accounts can be inspected on MCA portal by paying small Rs.50

Famous for

All small entities/start ups/old entities

For all

Slowly getting famous. Perfect for professional firms like CAs, CS, Doctors etc.

Can it hold property as per Registration Act?

Yes

Yes

Yes, LLP can also hold property.

Registration Act does not recognize LLP as an entity to hold any properties.  (However, Registration act may be amended in near future).  This is just a procedural problem as LLP is a relatively new act.

Tax Audit requirements

Only if turnover exceeds rs.1 crore for businesses & Rs.25 lacs for professionals

Only if turnover exceeds rs.1 crore for businesses & Rs.25 lacs for professionals

Only if turnover exceeds rs.1 crore for businesses & Rs.25 lacs for professionals

Other audit like annual statutory audits

No

Yes

Required only if turnoer exceeds Rs.40 lacs or contribution exceeds Rs.25 lacs

Plus annual return to be filed in 60 days of close of year

Annual Registrar of company filings of accounts etc.

No

Yes

yes

Change in Management

Partners can retire as per retirement deed

Notice of change of director is to be given by company.

A partner who has resigned from LLP can himself file notice of his resignation to ROC.

Shares Certificate Etc

Not required

Share, share certificate, register of members, transfer and transmission of shares etc. required.

No requirement of share and share certificate. Hence, no question of its issue, allotment, transfer, rectification of register etc.

Conduct of Business

No meetings required

Board meetings, general meetings are required.

No provision for regular meeting of Board and members. Partners can decide when and how to meet, delegation of powers etc. Provision is made that LLP should maintain minute book

Treatment of Secured Loan

Generally no requirement

Charges are required to be registered

No provision for registration of charges.

Maintenance of Records

No records, but accounts to be generally maintained

Elaborate records and registers are required to be maintained

No records and registers have been prescribed, but general accounts to be maintained.

Restriction on Board or Partner

Generally partners are free to enter into any contract

Restrictions on Board regarding some specified contracts, contracts in which directors interested, investments, loans and guarantees to other companies

Generally partners are free to enter into any contract

Disclosure

No requirement except Accounting standard (AS)18 mandates related party transactions

Disclosures required of contracts where directors are interested

No requirement of disclosures required of contracts where partners are interested, unless specified in LLP Agreement.

However, AS 18 mandates related party disclosures

 

 

Ċ
CA Kunjan Shah(www.nsc.in),
25 Feb 2012, 20:29
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