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Limited liability partnership ("LLP") is a new concept envisaged for ease of doing business which acts as an advantage compared to Partnership and Company. LLP can be constituted with 2 partners with one being designated partner. Every limited liability partnership shall use word either "Limited liability Partnership" or ‘"LLP" as the last name. Every LLP shall maintain proper books of accounts either on cash basis or accrual basis on double entry system and shall be maintained at the registered office. Every LLP shall file within prescribed time the statement of account and solvency with the registrar every year in form and manner prescribed. Every limited liability partnership within a period of six months from end of each financial year prepare a statement of account and solvency for said financial year. Based on rule notified by MCA LLP is required to get books of accounts audited where by any one criteria is satisfied -

  • Turnover exceeds 40 lakhs or more
  • Networth (capital contribution) exceeds 25 lakhs or more .
Limited Liability Partnership Act 2008

A foreign LLP shall also establish business in India and file form 27 to registrar within 30 days.

LLP taxation

  • Tax audit becomes applicable for profession as defined in 44AA of IT act where by gross receipt exceeds Rs 50 lakhs as on relevant previous year. Tax audit becomes applicable for a business if turnover exceeds Rs 1 crore as on relevant previous year . The limit of 10 crore can be taken provided cash receipts and cash payment does not exceeds 5 % of the total receipts and payment here LLP get covered.
  • If LLP get covered by LLP Audit LLP act 2008 applies if turnover exceeds 40 lakhs or more or capital contribution from partners exceeds 25 lakhs or more then form 3 CA/CD(required to get audited under other statue ) get covered if not 3CB/CD (if not required to get audit under any statue) get covered .
  • Section 44 AD states that in case of the assessee engaged in business and turnover does not exceed 1 crore as on previous year can opt for presumptive scheme . Here a provision is there where by 6% of gross receipt or any other higher sum can be offered in case of digital payments and 8% of gross receipt or any other higher sum in case of cash payments (include bearer cheque) .Section 44 ADA states that in case of assessee engaged in profession as defined under section 44AA 50% of gross receipts or any higher sum declared by assessee can be offered as tax. However presumptive scheme cannot be opted by LLP as definition of the term firm excludes LLP .
Limited Liability Partnership Act 2008

What tax implication will come if LLP whether in profession or business cannot opt for presumptive scheme?

  • In case off LLP having business less than 1 crore and profession less than 50 lakhs will only do normal computation taking into account all income tax provisions of business income and file ITR 5 before 31st July of relevant assessment year . This is a scenario where by there is neither presumptive scheme nor tax audit.
  • LLP are taxed at 30% flat rate. (Surchage applies if total income exceeds 1 crore at 12%). Education cess at 4% applies irrespective of the amount .
  • There is no old scheme or new scheme applicability for LLP
  • Where by there are international transactions the same need to be reported in form 3 CEB where by due date is 30 th November of the relevant assessment year.
 

Difference between partnership LLP and company in simple terms

Basis

Partnership

LLP

Company

Act

Partnership act 1932

LLP act 2008

Companies act 2013

No of key person

2 Partners

2 partners one should be designated partner

  • I director -OPC.
  • 2 director -private company
  • 3 director -Public company

Liability

Unlimited

Limited

Limited by share or guarantee

Statutory audit

Not required

Only if turnover exceeds 40 lakhs or capital contribution exceed 25 lakhs

Mandatory irrespective of turnover

Registration

Optional

Registrar of LLP

Registrar of companies

Name

Any name as per choice

To include "LLP" or "Limited liability partnership as suffix .

To include ‘"Private limited ‘" in case of private company as suffix.


  

Published by

Venkat Raj
(student)
Category Corporate Law   Report

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