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Publication: Economic Times Kolkata; Date:2009 Jan 15; Section:India Emerging; Page Number 9
Unlimited Opportunity Becoming an LLP will help SMEs attract that much needed capital Monica Behura [email protected]
THE Limited Liability Partnership Bill, 2008 (LLP Bill), which was passed by the Lok Sabha on December 12. 2008, should provide adequate breathing space to small and medium enterprises, which till date have not been able to avail of the benefits of a corporate structure. Not only does the legislation provide benefits of corporate structure, it does away with the limitations and problems of proprietorship and the regular partnership structure. Limited liability partnership is a concept akin to both partnership and a corporate firm. In layman term, it is a partnership with a limited liability. However, the rules related to it are still under consideration. The LLP legislation and the rules related to it would be governing the entities registered under the Act. Till date, the SME sector largely works through the regular partnership or proprietorship structures, wherein the partners and sole proprietor, as the case may be, are personally liable for all liabilities of the business vehicle. “However, this new Act will provide the required breather to SMEs to convert their business vehicles to a LLP, whereby the liability of business vehicle could not be tagged and made personal liability of partners constituting it. LLP shall have a separate legal entity apart from the partners constituting it,” says Akhil Hirani, partner, Majmudar & Co. While small and medium companies have been given special protection under the Industrial Policy of 1948, wherein banks and financial institutions are required to give loans (lesser in amount) to the sector on a priority basis, it has been difficult for them to raise funds. However, by forming an LLP, it might become easier for SMEs to get loans as security creation will get easier. This is because a LLP would be a separate entity altogether than the partners who constitute it. “However, it remains to be seen whether the RBI would still consider SMEs who have acquired the status of an LLP as priority sector to be provided with easy bank loans. Banks and financial institutions will be able to enforce the securities created while granting the loans specifically as the LLP can be sued being a separate legal entity,” says Vineet Aneja, partner, Fox Mandal Little. Some of the essential features of LLP Bill are: There is no upper limit on the maximum number of partners. Any individual/body corporate and a foreign LLP can become a partner in an SME that has adopted a LLP structure and can invest in it as well. Small retailers, bullion traders, jewellery retailers among others will all be benefited by adopting LLP as they now have an option to convert the family-owned partnerships into a corporate-like structure. This new Act would also benefit the services sector and professionals like chartered accountants, company secretaries, lawyers will have an option to organise themselves as LLPs. This may require modifications in the parent acts which govern such professionals. The ministry of MSME had taken a view that in the light of introduction of Micro Small & Medium Enterprises Development (MSMED) Act and LLP Act, the 24% ceiling for equity investment by industrial undertakings, whether foreign or domestic, in the SME sector, would be done away with. This would pave the way for the SME sector to bring in fresh foreign investment in the form of equity holding. It would also give an incentive to the ministry of
MSME to liberalise foreign investment in the SME sector. “The government should modify FDI policy, exchange control laws and other relevant laws to make LLPs eligible investment entity for foreign investment as most of SMEs would now opt for a LLP status. Hence, there is a need that LLP should now be recognised as an eligible investee wherein foreign investment could be made in accordance with the FDI policy,” says Amit Agarwal, partner, S N Gupta & Co.
4/15/2009
Tax and Law: How to Incorporate a … SEARCH BLOG
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Tax and Law an information cell from FAPCCI, Hyderabad
Whats New Work shop on e-filing -- Central Excise Tuesday, April 14, 2009
How to Incorporate a New Limited Liability Partnership at 12:20 AM
A Limited Liability Partnership may be incorporated as per the procedure explained below: User Registration Register yourself on the website of Ministry of Corporate Affairs, developed for LLP services, i.e. http://www.llp.gov.in/ . This website may also be accessed through the website of the ministry http://www.mca.gov.in/. On the home page of the URL www.llp.gov.in click “Register” tab on top right hand corner of the page. Fill in the registration form. Fields marked * in the form are to be mandatory filled. Select your user name and password. Upload digital signature certificate …blogspot.com/…/how-to-incorporat…
1/9
4/15/2009
Tax and Law: How to Incorporate a …
On successful registration, system will give a message that you have been registered successfully. Obtain Designated Partners Identification Number (DPIN). All designated partners of the proposed LLP shall obtain “Designated Partner Identification Number (DPIN)” by filing an application individually online in Form -7. For obtaining DPIN kindly log in by clicking on the “Login” tab on top right corner of the home page, enter your user name and password. After login, click on the E-forms link. List of e-forms will open. Click and open Form 7. Fill up “Form 7” for allotment of DPIN Pay filing fee of Rs.100 online through credit card (master/visa) Submit the application form online. The system will generate a provisional DPIN. Kindly note it carefully Take the print out of the application form, affix a latest passport size photograph and get it attested/certified for submission physically along with documentary evidences for proof of identify and proof of residence with the Registrar LLP. Deliver the printed and signed application form, along with the prescribed documents by hand/courier/registered post to the Office of Registrar, Ministry of Corporate Affairs, 3rd Floor, “Paryavaran Bhawan”, CGO Complex, Lodhi Road, New Delhi-110003. For more details see Instruction Kit provided on the home page under “Users Guide” tab. Digital Signature Certificate Partner/Designated partner of LLP/proposed LLP, whose signatures are to be affixed on the e-forms has to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorized certifying agency, details of which are available on the home page of the llp portal under the tab “Certifying Authorities”. Reservation of name …blogspot.com/…/how-to-incorporat…
2/9
4/15/2009
Tax and Law: How to Incorporate a …
Log on to the LLP portal by clicking the “log in” tab on the top right corner of the homepage and enter your username and password. After login, click “E-Forms” link. Open Form-1 for reservation of name and fill in the details. Select name of the proposed LLP (upto 6 choices can be indicated). Any partner or designated partner in the proposed LLP may submit Form-1. Append digital signatures and submit the e-form Pay the necessary fee by credit card (master/visa). Free name search facility (of existing companies / LLPs) is available on MCA portal (hyper link available on LLP portal).The system will provide the list of similar/closely resembling names of existing companies/LLPs based on the search criteria filled up. Details of minimum two designated partners of the proposed LLP, one of them must be a resident of India, is required to be filled in the application for reservation of name. Only individuals or nominees on behalf of the bodies corporate as partners can act as designated partners. Check status of your application by logging on the portal For more details see Instruction Kit provided on the home page under “Users Guide” tab. Incorporation of LLP Once the name is reserved by the Registrar, log on to the portal and fill up Form-2 “Incorporation Document and Statement”. Pay the prescribed registration fee as per the slab given in Annexure A of the LLP Rules, 2009, based on the total monetary value of contribution of partners in the proposed LLP. Statement in the e-form is to be digitally signed by a person named in the incorporation document as a designated partner having permanent DPIN and also to be digitally signed by an advocate/company secretary/chartered accountant/cost accountant in practice and engaged in the formation of LLP. …blogspot.com/…/how-to-incorporat…
3/9
4/15/2009
Tax and Law: How to Incorporate a …
On submission of complete documents the Registrar after satisfying himself about compliance with relevant provisions of the LLP Act will register the LLP, maximum within 14 days of filing of Form-2 and will issue a certificate of incorporation in Form-16. You can check status of your application by logging on to the portal For more details see Instruction Kit provided on the home page under “Instruction Kit” tab. Filing of LLP agreement (Form-3) and Partners’ details (Form4) Form 3 (Information with regard to LLP agreement and changes, if any made therein) and Form-4 (Notice of Appointment of Partner/Designate Partner, his consent etc.) may be filed with the prescribed fee simultaneously at the time of filing Form-2 or within 30 days of the date of incorporation or within 30 days of such subsequent changes. For more details see Instruction Kit provided on the home page under “Instruction Kit” tab Posted by PURNA CHANDRARAO P
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Publication: Economic Times Kolkata; Date:2009 Jan 15; Section:India Emerging; Page Number 9
Unlimited Opportunity Becoming an LLP will help SMEs attract that much needed capital Monica Behura [email protected]
THE Limited Liability Partnership Bill, 2008 (LLP Bill), which was passed by the Lok Sabha on December 12. 2008, should provide adequate breathing space to small and medium enterprises, which till date have not been able to avail of the benefits of a corporate structure. Not only does the legislation provide benefits of corporate structure, it does away with the limitations and problems of proprietorship and the regular partnership structure. Limited liability partnership is a concept akin to both partnership and a corporate firm. In layman term, it is a partnership with a limited liability. However, the rules related to it are still under consideration. The LLP legislation and the rules related to it would be governing the entities registered under the Act. Till date, the SME sector largely works through the regular partnership or proprietorship structures, wherein the partners and sole proprietor, as the case may be, are personally liable for all liabilities of the business vehicle. “However, this new Act will provide the required breather to SMEs to convert their business vehicles to a LLP, whereby the liability of business vehicle could not be tagged and made personal liability of partners constituting it. LLP shall have a separate legal entity apart from the partners constituting it,” says Akhil Hirani, partner, Majmudar & Co. While small and medium companies have been given special protection under the Industrial Policy of 1948, wherein banks and financial institutions are required to give loans (lesser in amount) to the sector on a priority basis, it has been difficult for them to raise funds. However, by forming an LLP, it might become easier for SMEs to get loans as security creation will get easier. This is because a LLP would be a separate entity altogether than the partners who constitute it. “However, it remains to be seen whether the RBI would still consider SMEs who have acquired the status of an LLP as priority sector to be provided with easy bank loans. Banks and financial institutions will be able to enforce the securities created while granting the loans specifically as the LLP can be sued being a separate legal entity,” says Vineet Aneja, partner, Fox Mandal Little. Some of the essential features of LLP Bill are: There is no upper limit on the maximum number of partners. Any individual/body corporate and a foreign LLP can become a partner in an SME that has adopted a LLP structure and can invest in it as well. Small retailers, bullion traders, jewellery retailers among others will all be benefited by adopting LLP as they now have an option to convert the family-owned partnerships into a corporate-like structure. This new Act would also benefit the services sector and professionals like chartered accountants, company secretaries, lawyers will have an option to organise themselves as LLPs. This may require modifications in the parent acts which govern such professionals. The ministry of MSME had taken a view that in the light of introduction of Micro Small & Medium Enterprises Development (MSMED) Act and LLP Act, the 24% ceiling for equity investment by industrial undertakings, whether foreign or domestic, in the SME sector, would be done away with. This would pave the way for the SME sector to bring in fresh foreign investment in the form of equity holding. It would also give an incentive to the ministry of
MSME to liberalise foreign investment in the SME sector. “The government should modify FDI policy, exchange control laws and other relevant laws to make LLPs eligible investment entity for foreign investment as most of SMEs would now opt for a LLP status. Hence, there is a need that LLP should now be recognised as an eligible investee wherein foreign investment could be made in accordance with the FDI policy,” says Amit Agarwal, partner, S N Gupta & Co.
4/15/2009
Tax and Law: How to Incorporate a … SEARCH BLOG
FLAG BLOG
Next Blog»
Create Blog | Sign In
Tax and Law an information cell from FAPCCI, Hyderabad
Whats New Work shop on e-filing -- Central Excise Tuesday, April 14, 2009
How to Incorporate a New Limited Liability Partnership at 12:20 AM
A Limited Liability Partnership may be incorporated as per the procedure explained below: User Registration Register yourself on the website of Ministry of Corporate Affairs, developed for LLP services, i.e. http://www.llp.gov.in/ . This website may also be accessed through the website of the ministry http://www.mca.gov.in/. On the home page of the URL www.llp.gov.in click “Register” tab on top right hand corner of the page. Fill in the registration form. Fields marked * in the form are to be mandatory filled. Select your user name and password. Upload digital signature certificate …blogspot.com/…/how-to-incorporat…
1/9
4/15/2009
Tax and Law: How to Incorporate a …
On successful registration, system will give a message that you have been registered successfully. Obtain Designated Partners Identification Number (DPIN). All designated partners of the proposed LLP shall obtain “Designated Partner Identification Number (DPIN)” by filing an application individually online in Form -7. For obtaining DPIN kindly log in by clicking on the “Login” tab on top right corner of the home page, enter your user name and password. After login, click on the E-forms link. List of e-forms will open. Click and open Form 7. Fill up “Form 7” for allotment of DPIN Pay filing fee of Rs.100 online through credit card (master/visa) Submit the application form online. The system will generate a provisional DPIN. Kindly note it carefully Take the print out of the application form, affix a latest passport size photograph and get it attested/certified for submission physically along with documentary evidences for proof of identify and proof of residence with the Registrar LLP. Deliver the printed and signed application form, along with the prescribed documents by hand/courier/registered post to the Office of Registrar, Ministry of Corporate Affairs, 3rd Floor, “Paryavaran Bhawan”, CGO Complex, Lodhi Road, New Delhi-110003. For more details see Instruction Kit provided on the home page under “Users Guide” tab. Digital Signature Certificate Partner/Designated partner of LLP/proposed LLP, whose signatures are to be affixed on the e-forms has to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorized certifying agency, details of which are available on the home page of the llp portal under the tab “Certifying Authorities”. Reservation of name …blogspot.com/…/how-to-incorporat…
2/9
4/15/2009
Tax and Law: How to Incorporate a …
Log on to the LLP portal by clicking the “log in” tab on the top right corner of the homepage and enter your username and password. After login, click “E-Forms” link. Open Form-1 for reservation of name and fill in the details. Select name of the proposed LLP (upto 6 choices can be indicated). Any partner or designated partner in the proposed LLP may submit Form-1. Append digital signatures and submit the e-form Pay the necessary fee by credit card (master/visa). Free name search facility (of existing companies / LLPs) is available on MCA portal (hyper link available on LLP portal).The system will provide the list of similar/closely resembling names of existing companies/LLPs based on the search criteria filled up. Details of minimum two designated partners of the proposed LLP, one of them must be a resident of India, is required to be filled in the application for reservation of name. Only individuals or nominees on behalf of the bodies corporate as partners can act as designated partners. Check status of your application by logging on the portal For more details see Instruction Kit provided on the home page under “Users Guide” tab. Incorporation of LLP Once the name is reserved by the Registrar, log on to the portal and fill up Form-2 “Incorporation Document and Statement”. Pay the prescribed registration fee as per the slab given in Annexure A of the LLP Rules, 2009, based on the total monetary value of contribution of partners in the proposed LLP. Statement in the e-form is to be digitally signed by a person named in the incorporation document as a designated partner having permanent DPIN and also to be digitally signed by an advocate/company secretary/chartered accountant/cost accountant in practice and engaged in the formation of LLP. …blogspot.com/…/how-to-incorporat…
3/9
4/15/2009
Tax and Law: How to Incorporate a …
On submission of complete documents the Registrar after satisfying himself about compliance with relevant provisions of the LLP Act will register the LLP, maximum within 14 days of filing of Form-2 and will issue a certificate of incorporation in Form-16. You can check status of your application by logging on to the portal For more details see Instruction Kit provided on the home page under “Instruction Kit” tab. Filing of LLP agreement (Form-3) and Partners’ details (Form4) Form 3 (Information with regard to LLP agreement and changes, if any made therein) and Form-4 (Notice of Appointment of Partner/Designate Partner, his consent etc.) may be filed with the prescribed fee simultaneously at the time of filing Form-2 or within 30 days of the date of incorporation or within 30 days of such subsequent changes. For more details see Instruction Kit provided on the home page under “Instruction Kit” tab Posted by PURNA CHANDRARAO P
Home
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