LLP provides a lot of benefits to foreign investors.

 

Limited Liability Partnership [LLP] is prevailed by "Limited Liability Partnership Act 2008". 

 

Minimum 2 partners are required to form LLP and there is no upper limit on a number of partners. 

As per section 5 of the LLP Act, 2008 only an individual or body corporate may be a partner in LLP. A Hindu Undivided Family [HUF] cannot be treated as a body corporate for the purposes of the LLP Act, 2008. Therefore, a HUF or its karta can not become a designated partner in LLP.

 

A company incorporated outside India is entitled to become a partner in LLP. The LLP Act also provides that a “Foreign Limited Liability Partnership” can also establish a place of business in India. A careful study of the LLP Act will reveal that an LLP enjoys the beneficial features of incorporated bodies without having the disadvantages of normal partnerships.

 

From the year 2011, the Indian Government has allowed Foreign Direct Invest [FDI] in LLP. It is beneficial, easy and comparatively less expensive to form LLP. The mutual rights and duties of the partners inter-se are governed by the Limited Liability Partnership Agreement between the partners.

 

Income Tax: As far as the Income tax Act is concerned, a limited liability partnership will be taxed like a partnership firm. In other words, the firm shall be liable to pay tax at the rate of 30% on its taxable profits, but there will be no tax on the partners upon distribution of profit of the firm as LLP is not subject to Dividend Distribution Tax [DDT]. Income received from LLP is exempted in the hands of the partners.

 

The LLP Act makes certain specific provisions which will be found very useful by overseas investors;

• The rights of a partner in the share of profits and losses are transferable either wholly or in part. An existing firm may be converted into an LLP.

• Return of Income of LLP shall be verified and signed preferably by the designated partner or any other partner.

• Every partner will be jointly and severally liable towards payment of taxes.

• A private limited company may be converted into LLP. An unlisted public limited company may be converted into an LLP.

• A partner may lend money to and transact other business with an LLP and has the same rights and obligations as a person who is not a partner.

• An LLP can enter into a scheme of compromise or arrangement with its creditors or its partners. An LLP can enter into a scheme of amalgamation with another LLP.

 

It is, therefore, felt that LLP provides a good entry option to foreign enterprises for doing business in India.