Llp Mantra Ii 29 May 2009

LLP MANTRA (Volume – II)

www.LLPonline.in

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Particulars Page No.

Regular Section - Opportunities in LLP for Manufacturing & Service 3

News in LLP 5

Grey Issues in LLP 6

Practical tips for e – Filing on llp.gov.in 7

Partners Segment on Global Comparison 9

Recent Queries on LLP Club 10

What’s New on LLPonline.in 11

Public Opinion 11

Insight

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LLP has an immense role to play in the Manufacturing Sector. Around 95% of industrial units in

the country are SMEs (Small and Medium Enterprises) and the manufacturing sector is

dominated by these SMEs. About 40% of value addition in the manufacturing sector takes place

in the segment.

Over 90% of these SMEs are registered as proprietorships, about 2%to 3% as partnerships and

less than 2% as companies as per a survey conducted by the ministry of small-scale industries.

The reason of Non presence of Corporate Form in the manufacturing Sector is high Compliance

cost. Vice – Versa the presence of Proprietorship is due to complete flexibility and less

compliance cost. But for this gain the sector is losing the credit facility from the bankers.

Now the Limited Liability Partnership form has opened the door for Manufacturing Sector to

enjoy the dual advantage of less compliance with higher access to credits in the market.

Another advantage for SMEs that in the new LLP form alike Companies, only the Limited

Liability Partnership having turnover/contribution of more than Rs. 40/25 Lacs have to get their

accounts audited as per the requirement of law providing a step ahead in the flexibility.

SMEs would benefit most from LLP form, as it would allow an entrepreneur to get into the

business without exposing his full assets to it. In an increasingly litigious market environment,

the prospect of being a member of a partnership firm or Proprietorship with unlimited personal

liability is considered risky and unattractive and on the other side the corporate form is

expensive for SMEs. LLP provides a bridge between the two risks where an entrepreneur would

be able to foray into a business venture without any fear of being held liable for the partners'

misconduct.

Service Sector

LLP has come like boon for the service sector and especially for professionals like chartered

accountants/company secretaries & advocates. Now, LLP will give the professions the much

needed impetus of global presence and level playing field against their foreign counterparts.

From the perspective of customers, Limited Liability Professional Partnership concerns will

provide a single-window shop to all people wanting to avail professional services.

Regular Section - Opportunities in LLP for Manufacturing &

Service Sector

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From the perspective of professionals, the regime of limited liability partnership will provide a

platform to conduct profession efficiently that would in turn increase the capability to compete

with global firms apart from making the presence felt in international market for professional

services.

The introduction of LLP form of business would also promote entrepreneurship, particularly in

relation to the knowledge-based industries such as the information technology and

biotechnology sectors.

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Taxability of LLP: The government will amend the Income Tax Act later this year to provide a

tax regime for LLPs, which are being incorporated from the beginning of this month, a finance

ministry official said.

Stamp duty & Taxability on Conversion: The government may exempt partnership firms and

limited companies from paying stamp duty while converting into limited liability partnerships

(LLPs), a way of doing business that is favored globally for its flexibility.

“Tax neutrality is essential for the conversion of companies and partnership firms into LLPs,”

The proposed move will effectively address the difficulties in getting stamp duty exemptions

from state governments.

The finance ministry, however, may insist that the shareholding pattern of the company or the

partnership firm from which assets are transferred to an LLP, and the shareholding of the

receiving LLP be the same. “This is important to prevent any stamp duty evasion on asset sale

or transfer under the garb of conversion to LLPs,” said the finance ministry official.

Once the assets and liabilities of a partnership firm or a limited company are transferred to an

LLP, the original entity will be dissolved and removed from government records.

Source: The Economic Times

Dated: 28th

April 2009.

News in LLP

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Limited Liability Partnership still the hot Zone among the professionals because of the unnoded

issues, everyone is looking forward. Some of the brain storming issues llponline.in is sharing

with you

1. Form of Contribution: Section 32 provides the option to have the contribution of the

Partners in the Intangible Form and further the rules provide that the intangible

contribution should be certified by Practicing Chartered Accountant but no specific rules

has been prescribed for such valuation there should be proper guidelines for the

valuation of the Intangible Contribution. Further if the value of the Intangible

contribution amplified in future how that increment would be count in the books.

2. Discretionary LLP Agreement: LLP Agreement is not a requisite for the formation of a

Limited Liability Partnership as of now and in the absence of LLP Agreement Schedule 1

of LLP Act would be applicable defining the mutual rights and liabilities of the Partners &

the Partnership. However Schedule 1 in itself is an incomplete picture to define the

rights and liabilities of the partners. Various issues like Investment in body Corporate,

disclosure of substantial interest, decisive percentage of the partners, donations, Charity

by LLP are silent in the Schedule which in turn would give rise to disputes among the

partners. To avoid such circumstances either the LLP Agreement should be mandatory

or the Schedule 1 to be redrafted to present the widest picture.

3. Overriding Effect of LLP Act or the LLP Agreement: The LLP Law is silent on the

overriding effect of LLP Act on the LLP agreement as compared to Section 9 of the

Companies Act, 1956 wherein it is specifically provided that Companies Act would

override to contrary provisions provided in the Memorandum and Articles of

Association of any Company. No such provision is provided under LLP Act 2008

clarifying the position of the Act and the agreement in case of contradiction.

For example Section 42 of the LLP Act provides that any partner can transfer his rights as

per the LLP Agreement. Here the Act provides the right to transfer for a partner, What if

the agreement says that no partner can transfer his right. Whether the agreement

would prevail over the Act?

Grey Issues in LLP

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Reflecting light on e Filing concept some of the queries from our query bank before you

eradicating the murky side of the Concept:

� Do we need to register for e – filing on llp.gov.in?

Yes, as on date the registration should be in the Business user Category for e-filing.

� What is the requirement for registration as Business User?

The intended user must have Permanent Account Number & Digital Signature Certificate for

registration in the Business User category.

� Whether registration of DSC is necessary for e-filing on llp.gov.in?

Yes DSC for e-filing has to be registered but DSC of Designated Partners is only required to be

registered.

� What precaution you should keep in mind while registering your DSC?

Before registering your DSC, user have to export the CER file (Public Key) of his DSC on system

and this file is registered on LLP Portal. Later at the time of e –filing the attached signatures are

verified with this registered CER file.

� Whether e form can be saved?

Yes the e Form can be saved on the system if the Google Gear has installed on your system but

the user will not be able to upload the same.

� Is there any software requirement for e-Filing on llp.gov.in?

The users must have google gears and Java Run time version 6 on his system.

Practical Tips for e – filing on llp.gov.in

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� What are the fee payment modes available for e-filing on llp.gov.in?

Currently, only payment by credit card has been activated.

� We are doing the e-filing but it is showing "Signature Verification Error"?

If it is showing "Signature Verification Error", please check the following:

a) You are doing e-filing with the login of Designated Partner.

b) The CER file of the Designated Partner is registered on the portal and you are using the

Digital Signature of that Designated partner.

c) You have Java Run Time Environment software installed on your system.

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Facts LLP UK Singapore LLP US (California)

LLP

Indian LLP

Introduction of

Law

In the Year 2000

with the

nomenclature

Limited Partnership

Act, 2000

In the Year 2005

with the

nomenclature

Limited

Partnership Act,

2005

In the year 1991 in

Texas thereafter in

1996 in most

states of USA with

the nomenclature

Uniform

Partnership Act of

1996.

In the Year 2008

with the

nomenclature

Limited

Partnership Act,

2008

No. of Partners Minimum 2 Partners Minimum 2

Partners

Minimum 2

Partners

Minimum 2

Partners

Reduction of

Minimum Number

of Partners

In case of reduction

of minimum no. of

partners for more

than 6 months the

liability of Partners

will be unlimited

after 6 months.

In case of

reduction of

minimum no. of

partners for more

than 2 years the

liability of

Partners will be

unlimited after 2

years.

Law is silent on

this matter.

In case of

reduction of

minimum no. of

partners for more

than 6 months the

liability of Partners

will be unlimited

after 6 months.

Admission of

Partners

As per LLP

Agreement and in

the absence of

agreement consent

of all partners is

required.

As per LLP

Agreement and in

the absence of

agreement

consent of all

partners is

required.

As per the

agreement.

As per LLP

Agreement and in

the absence of

agreement

consent of all

partners is

required.

Cessation of

Partners

In accordance with

LLP Agreement and

in the absence of

the agreement by

giving reasonable

notice.

In accordance

with LLP

Agreement and in

the absence of the

agreement by

giving 30 days

prior notice.

As per the

agreement

In accordance with

LLP Agreement

and in the absence

of the agreement

by giving 30 days

prior notice

Liability of

Partners

Limited Liability of

Partners except in

case of fraud.


Partners except in

case of fraud.


Partners except in

case of fraud.


Partners except in

case of fraud.

Partners Segment on Global Comparison

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� LLP Agreement refers agreement between the partners or between LLP and its partners.

What are the standard specific clauses required to be covered by both the agreements?

� As per LLP Act, a former partner is entitled to receive from LLP, capital contribution

made and his right to share in accumulated profits of LLP. What is the meaning of ‘right

to share in accumulated profits’? What about his right to get share in the goodwill/

capital appreciation/ fair value of business ownership?

� As per Section 28(2) a partner is personally liable for his wrongful act and omission.

What is meaning of wrongful act or omission?

Most Striking query of the week submitted by Mr. Vikas Sharma

� One of the Designated Partner has to be resident in India and the definition of

resident in India means as per explanation given in Section-7(1), ‘a person who has

stayed in India for a period of not less than 182 days during the immediately

preceding one year’. Whether he need to be resident in India during every preceding

year, while he is Designated Partner.

To check out the views of other professional colleagues or to submit your view log in to

http://www.llponline.in/forum/

Recent Queries on LLP Club (Podium for LLP discussion on LLPonline.in)

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LLPonline.in has introduced the e – filing zone on its portal for assisting the users on the e- filing

aspect of Incorporation of LLP. Besides giving the complete procedural step from registration to

formation, the zone introduces you with the practical aspects to be taken care at the time of

e-filing.

Useful Presentation on

� e-filing acquainting the user with the steps of e-filing on www.llp.gov.in

� Steps to download the CER certificate required to register as a Business user on the

Government Portal.

To be benefited from e filing Zone log in to http://www.llponline.in/e_filling_zone.php

Our Poll of the week “whether existing Partnership Firm should convert into LLP” was favored

by 83% while 17% opinion was against the conversion.

To count your vote on” whether Schedule I of the LLP Act should be more exhaustive like

Table A in Companies Act, 1956” log in to www.LLPonline.in.

What’s New on LLPonline.in?

Public Opinion

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Disclaimer:

This paper is a copyright of Corporate Professionals (India) Pvt. Ltd. The entire contents of this paper have been developed on the basis of latest prevailing Limited Liability Partnership Act, 2008 in India. The author and the company expressly disclaim all and any liability to any person who has read this Newsletter or otherwise, in respect of anything, and of consequences of anything done or omitted to be done by any such person in reliance upon the contents of this Newsletter.

Our Team:

From the house of

Corporate Professionals (India) Private Limited

D-28, South Extn. Part-I, New Delhi-110049,

Ph: 011-40622200; Fax: 011-40622201.

Email: [email protected] & [email protected]

Ankit Singhi – 011-40622208

Asst. Manager, Corporate Affairs & Compliances E mail: [email protected]

Shipra Wadhwa-011-40622246

Associate, Corporate Affairs & Compliances

E mail: [email protected]

Llp Mantra Ii 29 May 2009

Business

Transcript of Llp Mantra Ii 29 May 2009