Opening a Limited Liability Partnership in India
LLP in India for Foreign Investors Doing
Business in India
A law to allow "Limited Liability Partnership" (LLP) in India has been
enacted by the Parliament of India recently. (Limited Liability Partnership
(LLP) Act of 2008).
LLP is an alternative corporate business entity that provides the benefits
of limited liability of a company but allows its members the flexibility of
organizing their internal management on the basis of a mutually-arrived
agreement, as is the case in a partnership firm.
This format would be quite useful for small and medium enterprises in
general and for the enterprises in services sector in particular, including
professionals and knowledge based enterprises.
As proposed in the Bill, LLP shall be a body corporate and a legal entity
separate from its partners. It will have perpetual succession. While the LLP
will be a separate legal entity, liable to the full extent of its assets,
the liability of the partners would be limited to their agreed contribution
in the LLP.
Further, no partner would be liable on account of the independent or
unauthorized actions of other partners, thus allowing individual partners to
be shielded from joint liability created by another partnerís wrongful
business decisions or misconduct.
The salient features of the LLP Act of 2008 are as follows:-
(i) The LLP will be an alternative corporate business vehicle that would
give the benefits of limited liability but would allow its members the
flexibility of organizing their internal structure as a partnership based on
(ii) The proposed Bill does not restrict the benefit of LLP structure to
certain classes of professionals only and would be available for use by any
enterprise which fulfills the requirements of the Act.
(iii) While the LLP will be a separate legal entity, liable to the full
extent of its assets, the liability of the partners would be limited to
their agreed contribution in the LLP. Further, no partner would be liable on
account of the independent or un-authorized actions of other partners, thus
allowing individual partners to be shielded from joint liability created by
another partnerís wrongful business decisions or misconduct.
(iv) LLP shall be a body corporate and a legal entity separate from its
partners. It will have perpetual succession. Indian Partnership Act, 1932
shall not be applicable to LLPs and there shall not be any upper limit on
number of partners in an LLP unlike a ordinary partnership firm where the
maximum number of partners can not exceed 20.
(iv) An LLP shall be under obligation to maintain annual accounts reflecting
true and fair view of its state of affairs. Since tax matters of all
entities in India are addressed in the Income Tax Act, 1961, the taxation of
LLPs shall be addressed in that Act.
(v) Provisions have been made in the Bill for corporate actions like
mergers, amalgamations etc.
(vii) While enabling provisions in respect of winding up and dissolutions of
LLPs have been made in the Bill, detailed provisions in this regard would be
provided by way of rules under the Act.
is mandatory for foreign investors to obtain governmental approval before
opening a branch in India or forming a joint venture in India. In some sectors
certain restrictions may apply.
For a foreign Investor in
India it is very important to choose a right kind of business or
corporate entity which best suits its purposes and takes care of
liability issues and tax planning issues. Foreign Companies
planning to do business in India should pay special attention to
Entry Strategies in India for Foreign
Investors and corporate structuring to save taxes to the best extent allowed
by laws and international tax treaties.
It is also mandatory for
foreign investors or foreign shareholders, both individuals and
corporate shareholders, to seek
Government Approvals for Investing in India In some special cases
Promotion Board, FIPB Approval for Foreign Investment in India
is required. In other cases
Reserve Bank of India, RBI Approvals for Foreign Investment in India is
The sectors where RBI Approval for foreign investors is available under automatic
route can be found at
FDI in India Sector wise Guide.
There are various
steps required to establish a business
in India, before and after incorporation, as mentioned
hereinafter. See also the
Procedure for Formation of Company in India.
A Company in India can have
foreign directors provided some conditions are fulfilled. The
directors of an Indian company, both Indian and foreigner
directors, are required to obtain
Identification Number - DIN and
Signature Certificate - DSC
Filings in India for corporate maintenance
requirements in India.
with India Free Guide
FDI in India Sector wise Guide | Formation of
Subsidiary in India | Starting a Business in India |
Incorporating company in India |
Procedure for Formation of Company in India |
Government Approvals for Investing in India |
Entry Strategies in India for Foreign
FIPB Approval for Foreign Investment in India |
RBI Approvals for FDI in India |
in Small Scale Sector in India Further Liberalized | Tax Rates in
India | Withholding
Tax Rates For Foreign Companies Doing Business In India Under The Tax Treaties
Filings in India | Joint Ventures in India
Outsourcing to India |
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Madaan & Co. has helped
companies in setting up there operations in India
and other countries. A careful tax planning is required before
opening a subsidiary, branch, joint venture, project office or
liaison office in India. We can help you in corporate planning,
and setting up in India
and other countries. We have also helped US law firms in
handling their India related legal work. We can help
your law firm or company in setting up in India and
other countries. Click
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