The Limited liability firms combine the advantages enjoyed by the partner companies and private limited companies. LLP companies operate in India with contributions from Indian and foreign partners. For a long time, Private limited companies are in India. In 2008 the LLP Act was sanctioned by the government of India. The hybrid structure is helpful for professionals, service providers and small business owners. In 2009, a Delhi-based company was incorporated as the first LLP. LLP is the business model for limited capital, multiple partners and small business operations. In case the goal of the company is aggressive towards growth, a private company is the right fit. LLP is a partnership firm that has limited liability. The partnership act was introduced by the Indian parliament in the year 1932. The chartered accountants, and cost accountants act came into practice between 1949 and 1959. The partnership act defined LLP and partnership as separate one. Chartered accountants associated with LLP are not allowed to do a statutory audit. In the LLP partnership act, 2008, MCA mentioned that section two of the act allow three professionals from three type of institutes to offer service in the association. This association will increase the income, growth, seniority and networking of the small and medium CA firms. LLP separates the legal entity of partners and firms. LLP structure help for operating based on a partnership agreement provides flexibility and reduces the financial risk of the professionals.
Which firms like to operate as a limited liability partnership?
Start-ups, small businesses and CA firms would like to operate under the LLP structure. The association of partners create negative issues. The structure of LLP protects the partnership. LLP separates the liability according to the contribution of the partners. It is possible to change the LLP into a private limited company with less time.
Do we need a CA to do LLP registration?
The attestation of CA, ACS, or advocate is essential for LLP registration. The professionals file the E-Form fillings. LLPs with an annual turnover of 40 lakhs and partner contributions of more than 25 lakhs are required to get the accounts audited by a chartered accountant. The partnership is inclusive of a financial and legal risks. LLPs need t register other documents such as importer and exporter codes, PF and ESI, shop and establishment license, professional tax registration, GST registration, and other activities.
How do LLPs do annual fillings?
The LLPs pay thirty per cent as income tax charges in India. If the total income is above one crore, the taxpayer needs to pay a surcharge of twelve per cent. Form 3CEB is for international transactions. This has to be certified by a chartered accountant. This specialised transaction has to be submitted in a separate form. Form eight is the financial statement of the company. Form eleven is the contribution of the partner to the business in the previous financial year. Form eight of LLP is about the ROC. It states the solvency state of the LLP. It is filled after six months of the date of the statement. LLPs have privileges in India as they promote foreign direct investment through the direct route. LLP with foreign investment should submit form FLA to the Reserve Bank. LLPs are exempted from maintaining the statutory register, minute’s books, and annual general meetings.
CA LLP firms:
In 2011, MCA clarified that CAs forming LLP are eligible to work as statutory auditors. The eligibility criterion is helpful for the association of CA, CMA and ACS professionals. CA firms grow in the domestic and international markets through this facility.
Advantages of LLP firm:
The LLP business model is beneficial to small firms. The firms with service-based operations find it easy to operate in the LLP model. The CA firms also receive services from professionals and non-professionals with the LLP model. The advantages of the LLP business model are discussed below.
• The LLP model provides freedom to all partners.
• LLP provide liability protection to the partners.
• After registration, LLPs have the freedom to increase the number of partners.
• An LLP can operate with a minimum of two partners. But, for a private limited company, a minimum of 200 members is mandatory. LLP is easy to operate with fewer members and partners.
• The funds for operations are gained through banks, NBFCs and partners.
• The asset and liabilities of the business and promoter are separate.
• The capital requirement of the business is minimum. A partner may contribute movable immovable, tangible and intangible assets.
• The registration process for an LLP is easy. The formalities are lesser. The Indian government demand for lesser documents and fees for the registration of LLP. The reason for making the registration easy is to promote the small business.
• Rule 24 of LLP, 2009 states that the LLP is bound to audit in case the turnover is over forty lakhs or the contribution of the partner is less than twenty-five lakh. The audit process is not mandatory for all LLPS operating in India.
• During the process of withdrawing profits, the company owners are asked to pay a DDT of 15 per cent. In the case of LLPs, it is easy to withdraw the profits without additional tax liability.
Final Words:
Chartered accountants provide services to different types of small firms. The LLP model has less number of employees and more projects. The purpose of providing valuable insight is to make professionals understand the vast opportunities in the job market. The demand for a chartered accountants and CA firm is high as they are the pillars of the economy. The LLP model will promote the brand name. In the long term, partnership and LLP models benefit CA firms.
