Can a Retail Grocery Store LLP, undertake online commodity trading with its partners' contributions?

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B S (Querist)
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03 December 2024 1. Can a LLP registered with nature of business of 'Retail Grocery Store' engage in online commodity trading with the funds contributed by its silent partners ?
2. With the profits from online trading the LLP will provide free grocery items to the contributing partners, in proportion to their share of contributions. So can the costs of this procurement of grocery items be taken as expenses of the LLP, for income tax purposes & P&L?
3. Can we change the nature of business of the LLP completely to 'Trading in online Commodities' & trade with the silent partners funds and share the profits in proportion to their contributions? Does any law such as RBI, SEBI, INCOME TAX or any others, restrict this?
4. If the answer to the 3rd is 'YES, then under what NIC code, would 'Online Trading in Commodities' come under?
5. Would this change in activity, effect the Shops & Establishment license & the Trade license in any way? Would we have to rea-apply freshly or just an amendment would do, what is the process for this?
6. Any other mandatory requirements, which would be required to be fulfilled, if any?
Thanks in advance, to all, who may respond.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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04 December 2024 The RBI has specific guidelines regarding the investment activities of LLPs. Generally, LLPs are not recognized as core investment companies under the Non-Banking Financial Company (NBFC) framework, which complicates their ability to engage in certain investment activities without prior approval. The RBI has been cautious about allowing LLPs to operate purely as investment vehicles, often requiring a no-objection certificate (NOC) for such entities to be registered or to convert existing companies into LLPs for investment purposes.
he MCA has recently introduced rules aimed at increasing transparency regarding significant beneficial ownership in LLPs. These rules require LLPs to disclose information about their beneficial owners and comply with various reporting obligations4.
The MCA does not explicitly prohibit LLPs from engaging in commodity investments. However, any such activities must align with the broader corporate governance and compliance frameworks established under the Companies Act, 2013, which now extends certain provisions to LLPs.
So, get approval from MCA based on your core business as commodity investment.
If NOC granted, you can invest in commodities.

B S

B S (Querist)
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05 December 2024 While thanking you for the response, I would like to know which format of registration is best suited for a group of persons or partners for contribution of funds for engaging in online commodity trading. As I have seen that the reputed brokerage houses are also allowing to open such trading account with them. If we rephrase the question that can a llp utilize it's spare funds for trading in online commodity? I had posted this question before too and had received answers that yes you can do so. So your answer becomes a little confused. Can you kindly put more clarity on this, Sir. Thanks.

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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05 December 2024 Difference of opinion bound to exist. Everyone has his/her own point of view, which may be correct though eyes. In CA exam hardly 4/5% get through, though all attempt their own way.

B S

B S (Querist)
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05 December 2024 Ok sir thanks. But my question still remains as unresolved and requesting more responses from learned friends. Thanks.