P. K. PANDYA & CO.

The Indian Government has, introduced the Limited Liability Partnership Bill, 2008 in Rajya Sabha on 21 October 2008. Currently in India, traditional form of partnership is in existence, meaning with unlimited liability of partners. The Bill makes provisions for the formation and regulation of Limited Liability Partnerships (LLP). It permits conversion of existing partnerships (with unlimited laibility) to be converted into LLP.
The LLP form of business is expected to cater in particular the needs of professionals, small-scale sector, venture capital funds as well as innovative business models and might lead to setting up of multi-disciplinary partnerships.

The LLP Bill 2008 passed by the Rajya Sabha on 24th October. Once it is approved by Lok Sabha and signed by the President, it becomes law. It will come into force from the date to be notified by the Government.

Lok Sabha gave its assent to the Limited Liability Partnership (LLP) Bill, 2008 on 12th December, 2008 which was earlier passed by the Rajya Sabha on 24th October, 2008. Now, upon receipt of consent of the President of India it would become law of the land.

However, actual registration of the LLP is likely to commence after 10/12 months considering rules, regulations to be framed, electronic filing forms to be drafted and ensuing general election in India, which is likely any time between March to May 2009.

The Limited Liability Partnership (LLP) Bill, 2008 is approved by the Indian Parliament on 12 December 2008. It is expected to be notified within 3 months and thus becomes the law of the land.

* As per the law any two persons can incorporate a LLP.
* Every LLP shall have two designated partners (i.e. partners responsible for compliance of law of LLP) and one of the two designated partners, shall be resident in India.
* LLP shall have a registered office and one other address for serving of documents by the Government and others.
* Audit of books of accounts of LLP is mandatory, except for small LLPs (how to determine smallness of LLP will be notified by the Govt).
* The said law provides for annual filing of statement of accounts and annual return. * The law provides for conversion of any existing partnership firms or private limited or unlisted public limited companies into LLP and such conversion will not affect rights and/or liabilities of erstwhile firm or company.
* For change of registered office not only consent of all partners required but also need to specify if any legal proceedings are pending. In case of shifting of registered office from on State of India to other State of India, newspaper advertisements to be published by LLP.

One of the major benefits of LLP is limited liability as compared to unlimited liability of partners under existing partnership firms. In case of unlisted companies, major benefit of conversion into LLP would be more flexible regulatory provisions and lower cost of compliance. However unless government provides for exemption from capital gain tax on conversion, existing entity would not find it attractive to get itself converted into LLP.