The rate of tax on Limited Liability Partnership is less than as compared to the company. No compulsory audit required- Every business has to appoint an auditor for checking the internal management of the company and its accounts.
However, in the case of LLP, there is no mandatory audit required. The audit is required only in those cases where the turnover of the company exceeds Rs 40 lakhs and where the contribution exceeds Rs 25 lakhs. Disadvantages Not covered all states- Due to various tax benefits and provisions many states restricts the formation of LLP in their states.
Less credibility- One of the major demerits of Limited Liability Partnership is that many people do not consider this as a credible business. People still trust more on company or partnerships.
Transfer of interest- Though interest and ownership can be transferred but it usually takes long procedure. Various formalities are required to comply with the provisions of the act. Due to its less recognition, it leads to hindrance in smooth functioning of the firm. Provisions have been made regarding filling up of casual vacancy in the office of the auditors, reappointment of the auditors, deemed reappointment of the auditors and removal of the auditors.
Unlike company there are no provisions under the LLP Act to intimate Registrar about the appointment of the auditor. An auditor may resign or may express his unwillingness to be reappointed by a notice in writing. In either case, he is required to enclose with the notice a statement of circumstances connected with his ceasing to hold office.
In other cases, the Annual Return is to be accompanied by a certificate from a Company Secretary. Act does not prescribe any procedure for conversion of sole proprietary concerns, trusts into LLP.
Provisions of section 58 4 are very significant. It being a notwithstanding clause has overriding effect on various laws for the time being in force. An application in format provided in Part A of Form 17 comprising information such as name, registration number and date of registration of firm along with statement of partners in format provided in Part B of Form Statement of consent of partners of the firm, Statement of Assets and Liabilities of the firm duly certified as true and correct by the Chartered Accountant in practice, copy of acknowledgement of latest income tax return.
Statement of shareholders, Statement of Assets and Liabilities of the company duly certified as true and correct by the Chartered Accountant in practice, copy of acknowledgement of latest income tax return. Registrar may refuse to register such proposed LLP, in case it is not satisfied with the particulars and other information provided along with the registration. LLP as per name specified in the registration certificate comes into existence.
Firm shall be deemed to be dissolved and if registered under Indian Partnership Act, removed from the records maintained thereunder. All the pending proceedings before any court, tribunal or any authority, by or against the firm, on the date of registration may be continued, completed and enforced by or against LLP. Any conviction, ruling, order or judgment of any Court, Tribunal or other authority in favour or against the firm may be enforced by or against the LLP.
All deeds, contracts, schemes, bonds, agreements, applications, instruments and arrangements subsisting immediately before the registration of firm as LLP, shall be enforceable by or against LLP as LLP was named therein or party thereto instead of firm. All deeds, contracts, schemes, bonds, agreements, applications, instruments and arrangements subsisting immediately before the registration of such company as LLP, shall be enforceable by or against LLP as LLP was named therein or party thereto instead of such company.
Every contract of employment continues to be in force on or after registration as if such LLP were employer thereunder instead of the firm. Every contract of employment continues to be in force on or after registration as if such LLP were employer thereunder instead of such company. Every appointment of the firm in any role or capacity which is in force immediately before the date of registration shall take effect and operate from the registration date as if LLP were appointed.
Any authority or power conferred on the firm prior to the registration as LLP shall take effect and operate from the registration date as if LLP was conferred. Every appointment of such company in any role or capacity which is in force immediately before the date of registration shall take effect and operate from the registration date as if LLP were appointed. Any authority or power conferred on such company prior to the registration as LLP shall take effect and operate from the registration date as if LLP was conferred.
No such provision for liability on erstwhile shareholders. It has been clarified provisions of Ss. Relevant company may take note in change of status of the auditor through resolution of the Board. Provisions are similar to that of sections to of the Companies Act, or to of the Companies Act, However currently no income-tax exemptions are been provided in case of restructuring etc.
In absence of income-tax incentives, restructuring of LLPs may not take off. Provision has been made regarding establishment of a place of business by a foreign LLP. Any change in the above particulars has to be intimated in the prescribed forms. If the documents are not in English language, the certified translation is also required to be filed. Foreign LLPs may be regarded as company for the purposes of income-tax. It consists of rules and forms. The Registrar may exercise the power suo motu if the LLP is not carrying on any business for two years or more; or on application by the LLP made with the consent of all partners if the LLP is not carrying on business for one year or more.
Documents so filed are to be authenticated by valid digital signature. In cases where document is required to be filed on non-judicial stamp paper, the LLP has to submit such document in physical form in addition to submission in the electronic form. The Central Government is to set up and maintain secure electronic registry. It will allow access to the public to inspect documents which are required to be in public domain under the LLP Act on payment of fees. Section 2 23 of the Income-tax Act, has been amended.
Thus, for the purposes of taxation, an LLP is treated as a firm and all the provisions applicable to a firm will apply to an LLP.
Accordingly, provisions contained in section 40 b relating to remuneration to the working partners and payment of interest to the partners will apply to an LLP.
The actual details of an LLP depend on where you create it. In general, however, your personal assets as a partner are protected from legal action.
Basically, the liability is limited in the sense that you may lose assets in the partnership, but not those outside of it your personal assets. The partnership is the first target for any lawsuit, although a specific partner could be held liable if they personally did something wrong. LLPs exist in many countries, with varying degrees of divergence from the U.
In most countries, an LLP is a tax flow-through entity intended for professionals who all have an active role in managing the partnership. There is often a list of approved professions for LLPs, such as lawyers, accountants, consultants, and architects. Small Business Administration.
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I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Business Essentials Guide to Mergers and Acquisitions. Business Business Essentials. Regulations vary by industry, state and locality. Announce Your Business. Some states, including Arizona and New York, require the extra step of publishing a statement in your local newspaper about your LLP formation.
The tax treatment for LLPs is similar to general partnerships, as discussed earlier. Profits and losses are passed through to the partners so the partners reflect them on their individual tax return.
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