Comparison of llp with other business forms


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Incorporation Checklist www.manojmehta.com


New Limited Liability Partnership (LLP)
Fact Sheet

A 'LLP' is an body corporate entity registered with the respective Registrar of LLP’s (ROLLP) of the respective states in which its registered office is located, and all the Registrars offices fall under the administration of the Ministry of Corporate Affairs, Govt. of India. A LLP is governed by the Limited Liability Partnership Act, 2008, and the regulations made there under. It has the following characteristics/benefits –

  1. Minimum 2 partners, maximum unlimited, but at least 2 partners shall be designated partners (DP) who shall be individuals (incl. nominee of body corporate) out of which at least one shall be resident in India with not less than 50% share. The 2 DP’s shall be responsible for all legal compliance under the LLP Act.

  2. One or more Private Limited Company or another LLP can be a partner in a LLP through its director / partner.

  3. Changes in name, partners, business activity, registered office and other terms can be carried out as desired, from time to time by filing the required Forms & documents with registrar.

  4. The mutual rights & duties of partners and the administration of the LLP shall be governed by an agreement or LLP Deed between partners inter-se and/or between the LLP and the partners. In the absence of any such Deed, the administration of the LLP and its partners shall be governed by the LLP Act & rules.


Comparison of LLP with other business forms

SN

Particulars

LLP

Old Partnership Firm

Private Limited Company

1.

Liability of Partners & Firm

Limited to partner’s agreed contribution & not liable for unknown acts of other partners. LLP is liable to the extent of its assets & liabilities only

The Firm, every partner is jointly & severally liable for all acts of the firm & its partners (even the personal assets of each partner are liable)

Limited to director’s share capital & not liable for unknown acts of other directors. Company is liable to the extent of its assets & liabilities only

2.

Flexibility

More flexibility compared to a Firm or Company

Less or no flexibility

More flexibility than Firm

3.

Statutory Compliances

Least and electronically regulated to minimise ‘red tape’

Cumbersome manual process with maximum ‘red tape’

More than a LLP but electronically regulated to minimise ‘red tape’

4.

Regulation

LLP Act, 2008

Indian Partnership Act, 1932

Companies Act, 1956

5.

Existence

Perpetual, irrespective of death or retirement of partners

Terminated on death or retirement of partners

Perpetual, irrespective of death or retirement of directors

6.

Separate Entity

Separate legal entity independent of its partners, hence preferred by outsiders dealing with the LLP

Not a separate legal entity, hence not preferred by outsiders dealing with the Firm

Separate legal entity independent of its management, preferred by outsiders

7.

Partners / Directors

Min – 2; Max – no limit

Min – 2; Max – 20/10

Min – 2; Max – 50 (members)

8.

Functionality

Designated Partners

Acting Partners

Directors

9.

Audit & Accounts

Audit not compulsory, accounts & annual return to be filed

Audit and filing of accounts not applicable

Audit compulsory, accounts & annual return to be filed


Incorporation Process

Time line estimates mentioned below are subject to prompt receipt of details/papers from the client and proper functioning of Govt. website. The implications of these points & abbreviations are explained on pages below.

Steps

Particulars

No. of Days

Step 1

Obtain a designated partners identification number (DIN) for at least 2 proposed partners, if not all (ask for our DIN Checklist)

1

Step 2

Obtain a digital signature certificate (DSC) for any one designated partner (ask for DSC Form)

1

Step 3

Application for Approval of Name desired of the LLP. If these names are rejected by Registrar, submit fresh names, or if alterations suggested, carry out suggested alterations & resubmit

5 – 15

Step 4

Incorporation papers – preparing & electronic uploading of incorporation docs & pay Govt. Fees

1

Step 5

LLP Registration and Certificate of Incorporation i.e. approval by Registrar

3

Step 6

Submit Partnership Agreement (LLP Deed) – drafting the LLP Deed & upload with eForm3. If corrections suggested by Registrar, carry out these and resubmit

3 – 6

Others

Proceed for Tax, VAT, Labour etc., statutory registrations (ask for any of our specific Checklists)

---

Total timeline 12 – 20 days
LLP Benefits

  1. Limited Liability – the greatest benefit by far, a LLP being a separate legal entity, the personal assets of its Partners are not affected for outstanding liabilities/payments to creditors or lenders (except Govt. dues) provided the partner has not acted fraudulently. LLP is liable to the extent of its assets & liabilities.

  2. Tax Benefits – being a corporate entity, an LLP can claim more tax-deductible costs and allowances from its profits compared to a sole proprietorship or partnership. Income taxes are passed through the business and reflected tax free on the partners' individual tax returns (no tax on profit distribution like dividend tax).

  3. Borrowing – can accept loans and deposits from its partners, relatives, banks and even from third parties.

  4. Capital – no minimum partnership capital requirements. Usual default capital is ` 50,000/-.

  5. Activities – can conduct retail, wholesale, trading, manufacturing or services activities, no requirement of minimum or maximum turnover or employees/workers. The name of the LLP should end with 'LLP'.

  6. Legal & regulatory requirements – simpler as the compliance process is electronic (paperless) & no need to visit Govt. Dept. or deal with officers. The act provides flexibility to devise the LLP agreement as per choice. 

  7. Popularity – convenient form of entity for professional firms like accountants, lawyers, engineers, artists, sportsmen, film actors or technicians etc., also suitable for Knowledge, Technology (R & D), Patent or Design enterprises, Philanthropy, Venture Capital Funds, Sahakari Sanstha’s in Agro and Handicrafts sectors.

  8. Real Estate – particularly suitable for real estate & construction firms as distribution of profits to partners tax free, can accept outside loans, limited liability, simpler compliances and corporate status.

  9. Hybrid vehicle – LLP has elements of both, a corporate as well as a partnership structure, it is called a hybrid between a company and a partnership and is a very popular structure worldwide and now in India.

  10. Status – a LLP has an enhanced status and aesthetic value in the eyes of local & overseas customers, clients, banks, creditors, funding agencies and general public.

  11. Acceptability – a LLP is a preferred as a corporate entity for awarding contracts, tenders, empanelment, providing finance etc., and has a larger image in the perception of the society.

  12. Perpetual Existence – it is an entity with perpetual succession. The members or directors may change from time to time, but that does not affect the continuity of the LLP.


Checklist – Incorporation of a New LLP


SN

Details to be provided against each of the points below

--

Glossary of terms & short forms used in this Checklist

` = Indian Rupees

ROLLP = Registrar of LLP, Mumbai, under MCA

DP = Designated Partner

MCA = Ministry of Corporate Affairs, Govt. of India

DSC = Digital Signature Certificate

LLPIN = Limited Liability Partnership Identification Number

DIN = Designated partner’s Identification Number

LLP Deed = Partnership Agreement / Deed

CIN = Company Identification Number

LLP Act = Limited Liability Partnership Act, 2008 (with Rules)

1.

Name, address & contact details of Applicant (applicant can be any one of the partners)

Name




Address




Town / City




State




PIN




Tel. No/s




Email




Fax




Website




2.

Have all the partners of this proposed LLP obtained ‘DIN’? ()

Yes




No




DIN is a unique, one time identification no. assigned by MCA to any person wanting to be a Designated Partner (DP)

If, Yes

mention the DIN of each of the proposed DP’s under point ‘8’ below ()




If, No

fill-up our ‘DIN Checklist’ separately for each DP & hand it to us with attachments ()




A Designated Partner shall be responsible for all legal compliance of the provisions of the LLP Act. Any two main partners (or even all partners) out the total no. of partners can act as designated partners.




3.

Have all the designated partners obtained (DSC)? ()

Yes




No




Digital Signature Certificate or ‘DSC’ is a legally recognised method of signing documents electronically

If, Yes

attach the ‘DSC Tokens (USB)’ or email the ‘PFX’ soft file, with password of all the DP’s ()




If, No

fill-up the ‘DSC Form’ (ask for DSC Form) for all the DP’s and forward it to us with the attachments specified therein ()




4.

Proposed names of the LLP (names desired)

(a) Give upto 6 choices of desired names in order of preference, avoid multiple names if a particular name is strongly desired (you have to re-apply in case of 1st time rejection). (b) Give significance of the prefix or special words (if any) in the names. (c) The names should reflect the proposed business activities. (d) Names are subject to approval by ROLLP

a.




b.




c.




d.




e.




f.




The name should comply with the LLP regulations; should not be similar or resemble or have phonetic resemblance, to any existing registered Company or LLP or should not be offensive, obscene or profane; should not violate IPR or trademarks; should not be a dictionary or generic word; should not imply patronage of government, royal or kingdom or indicative of a different legal constitution like society, HUF, firm, Inc., PTE, Gmbh, LLC etc.

5.

Whether any word/s in proposed name is registered under Trademark or IPR Laws? () Yes ___; No ___

If yes, provide registration certificate or receipt or such other evidence of registration.

6.

Proposed main objects or business activities, in full detail with description of products, processes, ancillary or related activities (use separate sheets if space provided is insufficient)
















7.

A.

Office address of the proposed LLP:







B.

Proof of Office Address – self certified copies of any one proof like – (a) Property Deed; (b) Govt. Utility Bill (electric, telephone etc); (c) Bank Statement (1st page & latest transaction page); (d) Passport; (e) Election or Ration Card etc. (proofs should not be over 2 months old) (tick the Proof provided by you)

If the office is owned by one of the partners or rented / leased then the documents mentioned above shall be required in respect of the owner of the premises along with owner’s Consent (ask for Consent format).

8.

Details of Partners, Capital Contributions & Profit Sharing: (use extra sheets if space is insufficient)

Name of Partner

Designated or Normal Partner?

DIN Number

Profit Sharing (%)

* Capital Contribution (`)

a.
















b.
















c.
















d.
















e.
















* the capital contributions should be brought in by the partners within one month of incorporation



9.

Whether any Partner of this proposed LLP is a Director in any other Company/s or Partner in any other LLP/s, details thereof (use extra sheets if space is insufficient)

Name of Partner

Other Directorships (Companies) / Partnerships (LLP’s)

Name of the Company / LLP

CIN / LLPIN No.

a.










b.










c.










d.










e.










10.

Do you have any specific instructions or matters which you want included in the ‘LLP Deed’ (indicative points given below)? Elaborate on these or other points, as required on a separate sheet

a.

Date of LLP

i.

Powers, duties, rights, obligations of partners

b.

Addresses of office, factory, branches etc.

j.

Admission, removal, resignation, death of any partner

c.

Business activities to be carried on, in detail

k.

Buy, sell, construct assets, immovable property

d.

Term of LLP partnership

l.

Accounts, financial year, audit, books/record etc.

e.

Capital of LLP with individual shares

m.

Indemnification of partners

f.

Profit sharing, remuneration, interest etc., to Partners

n.

Amendment of partnership deed

g.

Bank account/s and mode of operation

o.

Legal disputes & arbitration, jurisdiction

h.

Meetings of partners, minutes







11.

Enclose Cheque / Cash / DD for incorporation costs (you may also make RTGS or NEFT payment)

Have you enclosed the payment? ()

Yes




No




Please send full payment as per points 13 below, as we have to make advance disbursements. Our NEFT details – Bank of Baroda, Walkeshwar Br.; A/c. No. 06130200000115; IFSC Code – BARB0WALKES

12.

LLP Kit – Copies of LLP Deed & Common Seal (these items are optional)

  1. Do you want 25 extra printed & bound copies of LLP Deed? ()

Yes




No




` 4000/-

  1. Do you require Stainless Steel Common Seal? ()

Yes




No




` 1100/-

13.

Indicative chart of Total Incorporation Costs given below (all amounts in `) (service tax shall be extra)

Partnership Capital

Stamp Duty

Govt. Fees

Prof. Fees

Total Costs

Partnership Capital

Stamp Duty

Govt. Fees

Prof. Fees

Total Costs

50000

500

800

17500

18800.00

4 lakhs

4000

2400

17500

23900.00

1 lakh

1000

800

17500

19300.00

5 lakhs

5000

2400

17500

24900.00

2 lakhs

2000

2400

17500

21900.00

10 lakhs

5000

4500

17500

27000.00

3 lakhs

3000

2400

17500

22900.00

Over 10 lakhs

5000

5600

17500

28100.00

Notes: (a) Common examples of partnership capital are indicated above, it can be any rounded amount of your choice. (b) DSC charges @ 2000/- per designated partner shall be extra. (c) Add to the total costs above, the cost of LLP Kit. (d) Professional Fees relates to our incorporation services like advising, drafting of LLP Deed, structuring issues, eForm filing etc.

Fill-up the above checklist with clarity and information to the fullest extent without omissions and short forms and email it to us. Kindly take careful note of the statutory compliances and the related penalties, provided below.



Compliances & Penalties under LLP Law

(given below are only common examples of compliances, the list is not at all exhaustive)


  1. Regular / Annual Compliances (annual mandatory compliances irrespective of any event) (amounts in `)




SN

Head

Section

Compliance / Filing documents with ROC

Penalty for Non Compliance

1.

Statement of Accounts & Solvency

34(2)

LLP to file a Statement of Account & Solvency (annual Accounts) within 6 months of year end, in eForm8

25,000 upto 5,00,000 on LLP and 10,000 upto 1,00,000 on every designated partner in default

2.

Annual Return

35(1)

LLP to file a Annual Return within 60 days of year end, in eForm11

25,000 upto 5,00,000 on LLP and 10,000 upto 1,00,000 on every designated partner in default



  1. Event Based Compliances (triggered by any specific event)




SN

Head

Section

Compliance / Filing documents with ROLLP

Penalty for Non Compliance

1.

Change in Designated Partners

7(3),

7(4), 9

Notice of any incoming or outgoing designated partners to be filed within 30 days, in eForm4. If no. of designated partner falls below 2, all the other partners shall be deemed designated partners.

10,000 upto 1,00,000 – on the LLP & every designated partner who is in default

2.

Change of Registered Office

13(3)

Notice of change in regd. office address to be filed within 30 days, in eForm15

10,000 upto 1,00,000 – on the LLP & every designated partner who is in default

3.

Change of Name

19

Notice of change in name of LLP within 30 days, in eForm15

5,000 upto 5,00,000 + 50 per day – on & every designated partner in default

4.

Changes in LLP Agreement / Deed

23(2)

Notice of changes in the clauses or terms of LLP Deed to be filed within 30 days, in eForm3

5,000 upto 5,00,000 + 50 per day – on LLP & every designated in default

6.

Change in Partners

25(2)

Notice of any incoming or outgoing other partners or changes in partner’s name, address, contacts, to be filed within 30 days, in eForm4

2,000 upto 25,000 – on LLP & every designated partner in default

7.

Books of Accounts , Audit

34(1)

LLP to maintain books of accounts as prescribed & get them audit if applicable. Audit applicable if Capital exceed 25 lakhs or turnover exceeds 40 lakhs.

25,000 upto 5,00,000 on LLP & 10,000 upto 1,00,000 on every designated partner in default



_______________________

(name & signature of client)


Manoj Mehta & Co., Chartered Accountants, Mumbai. Tel: 22005454. Email: mail@manojmehta.com Page of

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