Partnership Deed...Urgent Sir!!!

This query is : Resolved

Rajesh (Querist)
Follow

14 August 2010 Dear Experts,
One of my friend is going to start a call center business with his another friend.
He wants me to prepare and give a partnership deed. In such a case can i advice him to execute limited liability partnership. What is the advantage of executing such a limited liability partnership rather than an ordinary partnership agreement. Since this involves an strategic decision i want to advice my friend which will be a safer one for him and also his friend.
Everyone's reply is highly appreciated. Thanks for everyone.
With regards,
Rajesh.

CA Sanat Pyne

CA Sanat Pyne (Expert)
Follow

14 August 2010 LLP and others

Points
Traditional Partnership Firm
Limited Liability Partnership
Private Limited Company

Number of Members
Minimum 2 maximum 10 (for banking) or 20 (for others)
Minimum 2 and no limit on maximum numbers
Minimum 2 and Maximum 50

Liability
Unlimited. Personal estate of partner is also liable to make good the debt of firm
Partner’s liability is limited to the extent of its capital contribution.
Liability of member is limited to the extent of share capital held and unpaid

Legality Status
Does not have separate identity from their partners.
Has separate status in eyes of law different from its partners.
Has separate identity different from its members

Governing statue
Partnership Act 1932
Limited Liability Partnership Act 2008
Companies Act 1956

Registration
Not compulsory. Firm can voluntarily get itself registered with registrar of Firms
Compulsory with Registrar of Companies
Compulsory registration with Registrar of Companies

Name
No specific provision in this regard.
Should contain word Limited Liability Partnership or LLP after its name
Should contain word Private Limited after its name.

Documents for formation
Partnership deed is required which can be oral or written
Incorporation Document and partnership agreement is compulsory
Memorandum of Associations and Article of Association is compulsory

Annual returns and statements
Not required to file any documents about accounts
Required to file annual return and statement with ROC
Required to file annual return and statement with ROC

Audit
No specific provision in Partnership Act 1932
Compulsory if contribution exceeds Rs 25 lakhs or turn over exceeds Rs 40 lakhs
Compulsory irrespective of turnover

VINOD ARORA

VINOD ARORA (Expert)
Follow

14 August 2010 A LLP is quite similar to a normal partnership, except that the partners r personally not liable for negligent acts of other partners. In general partnership, each partner is liable for the debts and obligatiotns of the business as well as the malpractice of any other partner.

Income taxes in an LLP are passed through the business and reflected on the partners’ individual tax returns. Because of the limited liability of each partner and pass-through tax status, LLPs are a very popular business structure.

The LLP framework could be used for many enterprises, like service industry of any kind, Enterprises in new knowledge and technology based fields where the corporate form is not suited,
professionals such as CAs, CWAs,CSs and Advocates,etc.

Under partnership firm, every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner.

Under LLP structure, liability of the partner is limited to his agreed contribution. Further,no partner is liable on account of the independent or un-authorized acts of other partners,thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful acts or misconduct.

LLP will have lesser compliance requirements as compared to a company.

LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.

Since LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a company and a partnership.

Upgrade to CAclubindia Pro. Subscribe Now!