Accountant Liability for Tax Returns by dgf51607


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									        Analysis on
Limited Liability Partnership

               CA.V.M.V.Subba Rao
               Chartered Accountant
International Scenario

   Limited Liability Partnership has been
    prevalent in many countries including
             USA       - Year - 1990
             UK       - Year - 2000
             JAPAN    - Year - 2006
             SINGAPORE – Year – 2006

   Our LLP model is based on UK /Singapore
Journey of LLP in India

   In the year 1997 Abid Hussain Committee
    recommended Legislation of LLP in India
   In the year 2003 Naresh Chandra Committee
    prepared a Report on LLP
   On 15th December,2006 the LLP Bill,2006
    was introduced in Rajya Sabha by MCA
   On 27th December,2007 Parliamentary
    Standing Committee submitted a Report to
    Lok Sabha & Rajya Sabha
Journey of LLP in India (Contn.)

   On 21st October,2008 the Revised LLP
    Bill,2008 was introduced in Rajya Sabha
   On 24th October,2008 the LLP Bill,2008 has
    been passed by Rajya Sabha
   The LLP Bill,2008 will now placed for
    approval of Lok Sabha in December,2008
    and may, hopefully, be passed before the
    end of the current year.
The Limited Liability Partnership Bill,2008

 Constitutional Background              The LLP Bill,2008
                                         consists of :
 The Central Government has                 14 Chapters
 exclusive power to make
 Limited Liability Partnership Act          81 Sections
 under Entry 44 of List I of the            04 Schedules
 Union List
                                        The LLP Rules &
                                         Forms consists of:
                                            16 Chapters
                                            40 Rules
                                            29 Forms
                                            03 Annexures
Basic Features of LLP

   LLP is a Body Corporate having perpetual
   LLP is a legal entity separate from its
   Any Change in partners of a LLP shall not
    affect the existence, rights or liabilities of the
   No partner is personally liable to liabilities of
    the LLP
Basic Features of LLP

   Liability of LLP is not liability of individual partners.
   LLP must have at least two partners
   No maximum Limit of partners
   Any Individual or Body Corporate may be a partner
    in LLP.
   Partner is an agent of LLP but not of other partner.
   Ministry of Corporate Affairs is administrating
Basic Features of LLP

   The Provisions of Indian Partnership
    Act,1932 shall not apply to a LLP.
   The Provisions of Companies Act,1956 can
    be made applicable with suitable modification
    by issuing a notification to LLP
   If the number of partners fall below two, the
    surviving partner will have to admit at least
    one more partner within 6 months. If he does
    not do so, his liability will become unlimited
    and LLP will be wound up.
Designated Partners

* Every LLP shall have two (2) Designated
* At least one of such designated partner
     shall be resident individual..
* Every Designated Partner shall obtain
     DPIN / DIN from MCA.
Incorporation Document - Form 2

   Name of LLP                  Similar to MOA
   Proposed Business            No provision to amend
   Address of Regd. Office       Incorporation
   Names and addresses           Document
    of                           Provision to Change
       Partners                  Name, Business &
       Designated Partners       Registered Office
   Any other information        Certificate of
    prescribed                    Incorporation by ROC
                                  is conclusive evidence
Liabilities of Designated Partners

   Responsible for compliance of the provisions
    of the LLP Act including filing of various
    returns and documents specified in the Act.

   Liable to all penalties imposed on the LLP for
    any contravention of those provisions.
L L P Agreement -             Form 4

   Limited Liability Partnership Agreement
    means any written agreement between the
    partners of the LLP or between the LLP and
    its partners and its partners which determines
    the mutual rights and duties in relation to that
   After incorporation, the LLP may have the
    LLP agreement.
   The LLP agreement is similar to A O A of
L L P Agreement

   In the absence of any LLP agreement the
    provisions set-out in FIRST SCHEDULE is
   If the partnership agreement is executed
    before registration of LLP the partners will
    have to ratify this agreement after
    incorporation of LLP and file with ROC

   All partners entitled to share equally in the Capital
    and Profits/losses.
   Indemnity Clause
   Every Partner shall take part in management
   No partner shall be entitled to remuneration.
   No partner introduced without consent of all
   All decisions with majority of partners consent
   Minutes to be recorded within 30 days
   Render True Accounts
   All Disputes referred to Arbitration Act

   Contribution of Partner is similar to Share
    Capital of a Company.
   Contribution may be Tangible or Intangible.
   Contribution of partner consisting of Tangible
    or Intangible or Other Benefits shall be
    valued by the Practicing Chartered
    Accountant or Cost Accountant or approved
    valuer from the panel.
   Nature and amount of Contribution should be
    disclosed in accounts
Designated Partners and their role

   The „designated partner‟ has no implied
    authority to conduct day to day business of
   It is not essential that power to conduct
    business should be with designated partner.
   Appoint any partner as “Managing Partner” or
    “Executive Partner” to manage the day to day
    affairs of LLP
Accounts and Audit
   Statement of Account &           A LLP shall be exempt from
    Solvency                          the audit of its accounts if
         Form 8                      its turnover does not
   To be filed with ROC within       exceed, in any financial
    6 months from close of            year, Rs.40 Lakhs; or its
    financial year                    contribution does not
                                      exceed Rs.25 Lakhs.
   Annual Return
         Form 11
   To be filed with ROC within      Such audit shall be carried
    60 days.                          by a Chartered Accountant
                                      in practice.
   Annual Return to be
    certified by Company
    Secretary Only                   Required to keep all recrods
                                      for 8 years.
Accounts and Audit

   Financial Year means the period from April 1 of a
    year to the March 31 of following year.
   All Accounts, Details and documents are available
    for public Inspection.
   Very heavy fines for delay in filing of Returns –
    Minimum Rs.25,000/- /Maximum –Rs.5 lacs
   Offenses compoundable.
   Heavy Fees for late filing of documents- Rs.100 per
   Late filing up to 300 days is permissible
Other Provisions

   Compromise, arrangements or reconstruction
    of LLP
   Winding up and dissolution of LLP
   Strike off defunct LLP
   Liability of partner by holding out.
   Whistle Blowing
   Assignment and transfer of partnership rights.
Other Provisions

   Investigation of affairs of LLP
   Every LLP shall have either the words
    “Limited Liability Partnership” or the acronym
    “LLP” as the last words of its name.
   Application of Name availability.
   Minor can be admitted to the benefits of LLP
   E-filing of documents.
   Inspection of documents filed ROC

  It Contains provisions for Conversion of
  existing Partnership Firm into Limited
  Liability Partnership.

  It Contains provisions for Conversion of
  existing Private Company into Limited
  Liability Partnership

  It Contains provisions for Conversion of
  existing Unlisted Public Company Firm
  into Limited Liability Partnership

   LLP Act is silent regarding taxation of LLP
    under the Income-tax Act.
   A separate Chapter is required under
    income-tax on taxation of LLP
   Pass-through Concept:
       Share of each partner should be taxed in the
        hands of individual partners (as was the provision
        in case of partnership up to 1993).
       Let us wait and see how LLP and individual
        partners are made liable to income-tax

          CA. V.M.V.SUBBA RAO

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