1.0 INTRODUCTION – LIMITED LIABILITY PARTNERSHIP (LLP) AS A FORM OF SETTING UP BUSINESS IN INDIA
2.0 FEATURES OF THE LLP BUSINESS MODEL
3.0 ADVANTAGES OF SETTING UP BUSINESS IN LLP FORM.
4.0 DISADVANTAGES OF SETTING UP BUSINESS IN LLP FORM
5.0 FOREIGN DIRECT INVESTMENT (FDI) IN LLP.
6.0 REGULATORY ENVIRONMENT FOR LLP.
7.0 PROCEDURE, TIMELINE, AND COST FOR INCORPORATING LLP.
8.0 LLP AGREEMENT.
9.0 ANNUAL FILING AND OTHER APPROVAL/COMPLIANCE-RELATED FILING TO BE MADE BY LLP.
10.0 LLP FEES.
LLP form of business organization combines the advantageous features of both company and partnership into a new business model. LLP is viewed as an alternative business vehicle in which the liability of its partners is limited to the extent of their capital contribution or as agreed as per the Limited Liability Partnership Agreement. The primary intention of LLP is that its external structure should mirror that of the limited company but in terms of the conduct of internal affairs, it would be similar to a traditional partnership. An LLP is a body corporate, with a distinct legal entity separate from that of its partners. It has perpetual succession and a common seal. It is liable to the third parties independent of the other partners. Any change in its partners, will not affect the existence, rights or liabilities of the LLP. LLP can make contracts, hold assets, sue or be sued in its own name and can hold property or become insolvent.Unlike corporate shareholders, the partners of a LLP have the right to manage the business directly. One partner is not responsible or liable for another partner’s misconduct or negligence. Liability of the partners is limited to their agreed contribution in the LLP or as specified in the LLP Agreement. However, the partner’s liability in case of fraud is unlimited. The mutual rights and duties of the partners of LLP and the mutual rights and duties of LLP and its partners shall be governed by an LLP agreement between the partners or between LLP and its partners. In the absence of such agreement relationship of Partners and LLP would be governed as per Schedule 1 of LLP Act, 2008.
There are no serious disadvantages of setting up business in this form except that there are certain limitations for a foreign LLP. To incorporate an LLP requires a minimum of two partners so if an NRI/ Foreign national wants to form an LLP in India then at least one partner should be a resident of India. Two foreign partners cannot form LLP without having one resident Indian partner along with them. Also, there are some conditions with respect to Foreign Direct Investment in LLPs.
Additionally, the LLP Act has provided high penalties for default/ non-compliance on procedural matters such as delay in filing of e-forms.