Limited Liability Partnership Bill passed in HouseDecember 12th, 2008 - 10:36 pm ICT by IANS
New Delhi, Dec 12 (IANS) Parliament Friday passed the Limited Liability Partnership (LLP) Bill 2008, paving the way for an alternative corporate business vehicle that will give the benefits of limited liability and allow companies organize their internal structure as a partnership based on an agreement.A limited liability entity is a hybrid of existing partnership firms and full-fledged companies. It is a separate legal entity, liable to the full extent of its assets with the liability of the partners being limited to their agreed contribution in LLP.
Interestingly, no partner is liable on account of the independent or unauthorised actions of other partners.
A large number of existing companies, public as well as private, are expected to convert into LLP entities with an eye on the practical benefits, including those related to taxation that it provides.
Overseas professionals like chartered accountants (CAs) and company secretaries (CSs) are also expected to come to India and set up businesses here, as the proposed law allows foreign nationals to become partners in any LLP incorporated under the proposed provisions.
The framework of LLP is not restricted to professional services alone. Several business activities can be undertaken through the structure.
Under the LLP model, chartered accountants, company secretaries or even lawyers can set up multi-disciplinary firms that would act as a “one-stop” shop for people to avail of various professional services. Existing laws impose restrictions on carrying out these professional services through companies.
India recognises several forms of business entities, including sole proprietorships, Hindu Undivided Firms, partnership firms (which provide flexibility, but with unlimited liability jointly or severally) and companies that have limited liability but far less flexibility and high compliance requirements.
“The LLP will mean that professionals of these kinds will be able to do business together. There will be no limit on the number of partners, unlike the current limit of 20 members in a partnership firm,” the government said in a statement.
The taxation of LLPs is being addressed separately by the finance ministry under the Income Tax Act, 1961.
Indian LLPs would eventually extend their operations in the global markets like the US and Britain. In such a scenario, the taxation regime would have a significant impact on the viability of LLPs as it would determine the manner in which the LLP and its individual partners would be taxed, avoid situations of double taxation and provide for carrying forward the losses in the event of conversion from other forms to LLP and vice-versa.
Tags: chartered accountants, companies india, company secretaries, foreign nationals, liability entity, limited liability partnership, overseas professionals, partnership bill, separate legal entity, sole proprietorships