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Limited Liability Partnership (LLP)
  • By: admin
  • Date: 20 Sep 2019
  • Business
  • Comments:
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It is a form of alternative corporate business which provides flexibility as that of a partnership and the benefits of limited liability of a company.

Limited Liability Partnership (LLP) can continue their existence even after changes in partners. LLP is capable of entering into contracts and holding property in its name.

It is a separate legal entity, is liable to the full extent of its assets, but the accountability of the partners is limited to their agreed contribution in the LLP.

Further, no partner is responsible for the account of the individualistic or un-authorised actions of other partners; thus, individual partners are protected from joint liability for another partner’s wrongful decisions or conduct.

A between the partners and the LLP or agreement between the partners as the case may govern the mutual rights and duties of the partners in an LLP. The LLP, however, is not released of the liability for its other obligations as a separate entity.

Structure of an LLP

By following the provisions specified in The Limited Liability Partnership Act, 2008, LLPs should be registered under the provisions of the Companies Act, 1956 with the Registrar of Companies (ROC) and all LLPs shall have their registered office. An Incorporation Document supported by at least two partners shall have to be filed with the Registrar in a prescribed form. Contents of LLP Agreement, as may be specified, shall also be required to be filed with Registrar, online. Also, the contents of LLP Agreement or any changes made therein, if any, may be filed in Form 3 and details of partners/designated partners may be filed in Form 4 in accordance with LLP Rules, 2009.

As per provisions of The Limited Liability Partnership Act, 2008, in the inadequacy of agreement as to any matter, the liabilities and mutual rights shall be as provided under the Schedule I to the Act. Therefore, if any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it will have to enter into an LLP Agreement, explicitly mentioning the excluding applicability of any or all paragraphs of Schedule I.

Advantages of LLP
 
  1. It is organised and operates based on an agreement.
  2. Provides flexibility without imposing detailed legal and procedural requirements
  3. Enables professional/technical expertise and initiative to combine with financial risk-taking capacity in an innovative and efficient manner
  4. No minimum capital requirement in LLP. An LLP can be formed with the least possible capital.
  5. A minimum of 2 partners is required for LLPs while there is no limit on the maximum number.
  6. Lower registration cost
  7. LLPs are needed to get the tax audit done only in the case: The aidings of the LLP exceeds Rs. 25 Lakhs or The annual turnover of the LLP exceeds Rs. 40 Lakhs

Disadvantages of LLP

1) Higher Penalty for Non-Compliance: Even if an LLP does not have any activity, it is required to file an income tax return and annual return each year. In case an LLP fails to file Form 8 and 11 (Annual Filing), There is no limit on the penalty, and it could run into lakhs if an LLP has not filed its annual return for a few years.

In the case of a company, the penalty for not filing an annual return for the company is set to increase and matched with the LLP.
In the case of a proprietorship or partnership firm, there is no requirement for filing an annual return. Hence, the only penalty under the Income-tax Act would be applicable.

2) Restricted Access to Capital Markets: LLPs are a small form of business and cannot get its shares listed on any stock exchange through initial public offerings. With this restriction, limited liability partnerships may find it difficult to attract outside investors to buy the shares.

3) Inability to Have Equity Investment: An LLP does not have the concept of equity or shareholding like a company. Most LLPs have to rely on funding from promoters and debt funding.

4) Higher Income Tax Rate: The income tax rate for a company with a turnover of up to Rs.250 crores is 25%. However, LLPs are taxed at a 30% rate irrespective of the turnover.

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Limited Liability Partnership (LLP)

By: admin Business 20 Sep 2019

It is a form of alternative corporate business which provides flexibility as that of a partnership and the benefits of limited liability of a company.

Limited Liability Partnership (LLP) can continue their existence even after changes in partners. LLP is capable of entering into contracts and holding property in its name.

It is a separate legal entity, is liable to the full extent of its assets, but the accountability of the partners is limited to their agreed contribution in the LLP.

Further, no partner is responsible for the account of the individualistic or un-authorised actions of other partners; thus, individual partners are protected from joint liability for another partner’s wrongful decisions or conduct.

A between the partners and the LLP or agreement between the partners as the case may govern the mutual rights and duties of the partners in an LLP. The LLP, however, is not released of the liability for its other obligations as a separate entity.

Structure of an LLP

By following the provisions specified in The Limited Liability Partnership Act, 2008, LLPs should be registered under the provisions of the Companies Act, 1956 with the Registrar of Companies (ROC) and all LLPs shall have their registered office. An Incorporation Document supported by at least two partners shall have to be filed with the Registrar in a prescribed form. Contents of LLP Agreement, as may be specified, shall also be required to be filed with Registrar, online. Also, the contents of LLP Agreement or any changes made therein, if any, may be filed in Form 3 and details of partners/designated partners may be filed in Form 4 in accordance with LLP Rules, 2009.

As per provisions of The Limited Liability Partnership Act, 2008, in the inadequacy of agreement as to any matter, the liabilities and mutual rights shall be as provided under the Schedule I to the Act. Therefore, if any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it will have to enter into an LLP Agreement, explicitly mentioning the excluding applicability of any or all paragraphs of Schedule I.

Advantages of LLP
 
  1. It is organised and operates based on an agreement.
  2. Provides flexibility without imposing detailed legal and procedural requirements
  3. Enables professional/technical expertise and initiative to combine with financial risk-taking capacity in an innovative and efficient manner
  4. No minimum capital requirement in LLP. An LLP can be formed with the least possible capital.
  5. A minimum of 2 partners is required for LLPs while there is no limit on the maximum number.
  6. Lower registration cost
  7. LLPs are needed to get the tax audit done only in the case: The aidings of the LLP exceeds Rs. 25 Lakhs or The annual turnover of the LLP exceeds Rs. 40 Lakhs

Disadvantages of LLP

1) Higher Penalty for Non-Compliance: Even if an LLP does not have any activity, it is required to file an income tax return and annual return each year. In case an LLP fails to file Form 8 and 11 (Annual Filing), There is no limit on the penalty, and it could run into lakhs if an LLP has not filed its annual return for a few years.

In the case of a company, the penalty for not filing an annual return for the company is set to increase and matched with the LLP.
In the case of a proprietorship or partnership firm, there is no requirement for filing an annual return. Hence, the only penalty under the Income-tax Act would be applicable.

2) Restricted Access to Capital Markets: LLPs are a small form of business and cannot get its shares listed on any stock exchange through initial public offerings. With this restriction, limited liability partnerships may find it difficult to attract outside investors to buy the shares.

3) Inability to Have Equity Investment: An LLP does not have the concept of equity or shareholding like a company. Most LLPs have to rely on funding from promoters and debt funding.

4) Higher Income Tax Rate: The income tax rate for a company with a turnover of up to Rs.250 crores is 25%. However, LLPs are taxed at a 30% rate irrespective of the turnover.

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Basic information of Companies

By: admin Business 29 Jul 2019

A Company is a type of business that is the most well-known corporate structure in India. It is a business structure with a separate legal entity and enrolled either under the old Companies Act, 1956 or the new Companies Act, 2013. After registration, it utilises "Private Limited" or Pvt. Ltd. or, on the other hand, Ltd. toward the end of its name to show the kind of company that is enrolled with service of corporate undertakings. In the event that you are intrigued to understand more about a company in India, then this article is for you. 

Enrollment technique for a company in India can be done inside a time of 15 days with the new simplified rules. Anyone getting ready for company registration in India must take after the characterised well-ordered system required by the Ministry of Corporate Affairs. Before beginning the well-ordered procedure of private restricted company enrollment, let us initially investigate to sorts of the company that can be framed in India. 

For us to understand how a company works and how to register it, one first needs to understand the kinds of Company in existence. The most vital piece of company establishment and registration is to choose the sort of company that you need to consolidate. According to the present Companies Act 2013, just four sorts of companies can be enlisted with Ministry of Corporate Affairs (MCA) which are Private Limited or Pvt. Ltd., Open Limited, One Person Company or OPC in India, Enrollment Under Section 8 of the Companies Act, 2013 (Non-Profit company). 

Company Registration system in India is the same for all sort of companies with a little distinction due to a portion of the unique prerequisites of the Act. 

Director Identification Number(DIN): In company enlistment process getting Director Identification Number or DIN for every director is the initial step. DIN is a special number issued by the MCA to all new or existing executives. For each Director to be accepted in a position of director, they need to have this unique number. 

Selecting a Name: The first thing in the company enrollment process is to check for name accessibility. The company is named before its introduction to the world. Prior to its enrollment, the promoters need to give no less than one name up to a most extreme of 6 elective names in the order of the priority. The proposed name ought to be characteristic of the primary objects of the association and ought not to look like any current enlisted company. 

Memorandum of Association and Articles of Association: The next stage in company enrollment technique after name endorsement is to draft Memorandum of Association (MOA) and Article of Association (AOA). You can take the help of proficient CAs or CSs for drafting MOA and AOA. Investors need to determine their name, address and occupation in writing and mark on the last page or membership page of the MOA and AOA before applying for company enlistment. 

Registration: In the last stage of the company enlistment process, we have to transfer the MOA, AOA, Location of the Registered Office, the Director’s personal information to the MCA site one by one and these particular structures ought to be signed digitally by a director. 

The establishment of a company is not only about the technicalities but also about the efforts that go into it. It is also about figuring out what type of business you want to do. One needs to select the field they are establishing their company into. There is also the matter of figuring out where to arrange the capital from. There are rules regarding how much money regarding how much needs to be borrowed and used, books of accounts need to be maintained. It is best to get a Promoter, CS and CA to help you float and run a company. 

The responsibility that comes with establishing a company is proportional to the success that can be achieved with it. The progress and profit factor is high, so is the scope of cheating; thus, it is necessary to have proper rules established to govern the establishment and running of a company. Following these rules is a sure shot way to utilise the maximum of your capacity and earn the most. 

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Company and types of Companies

By: admin Business 09 Jul 2019

A Company is defined as an association which is formed by natural persons, legal entities or a mixture between the two and the main purpose of the company is to develop commercial activities under the Indian Companies Act, 2013.  Various legal experts define the company. Section 2(20) of the Companies Act, 2013, represents the ‘Company' as follows: "Company means a company incorporated under this Act or any previous company law."

There are mainly six types of Company registration in India;

1. Private Limited Company: In the Private Limited Company, personal assets are different from business assets. Every shareholder is responsible for his share of the total capital. Private Ltd Companies need to maintain the records of financial transactions, board meetings, and annual reports, and so on.

A Private Ltd company consists of a shareholder, whereas the total capital of an entity is made of shares. The shares can be sold or transferred to other individuals who then becomes one of the owners of the company. Further, a Private Limited Company consists of three types:

  1. A company limited by shares means the company where the members are having its limited liability by the memorandum, if any, unpaid by the members.
  2. A company limited by guarantee is a company consisting the limited liability of its members by the memorandum to such amount as the members may respectively undertake to contribute the assets of the company in the event of its winding-up.
  3. Unlimited company – A company that has no limit on the liability of its members is called an unlimited company.
Here are a few examples of the private limited Companies: Flipkart, Parle, Snapdeal, Pepsi, Book mu Show, etc.

2. Partnership: Partnership business entities are similar to a sole proprietorship. The main difference between a partnership and sole proprietorship is that two or more members are necessary to form a partnership. The responsibilities, roles and the share of the partners are defined in an executed partnership deed.

The partners in a partnership deed define the ratio of profit sharing. In the case of the losses, each of the partners is responsible personally. Personal assets of partners can be used to compensate the losses incurred if any as decided by the partners. Examples of a partnership firm are as follows:

  1. Twitter: It is founded by Evan Williams, Biz Stone, and Jack Dorsey and is an outstanding example of prosperous business partnership. 
  2. Google: The founders of the Google namely Sergey Brin and Larry Page, ran a small search engine decade ago and turned it into the leading search engine in the entire world.

3Limited Liability Partnership: Limited Liability Partnership firm is different from the partnership firm as the personal assets are different from the business assets. In case the business incurs damages, the personal assets of partners are not at risk as to the share capital in entity defines the maximum liability of every partner. As compared to Sole Proprietorship and Partnership, Limited Liability Companies always has good credibility among the investors. The basic reason includes the maintenance of incorporation, tax and financial records. 

4. Sole Proprietorship: A company registered in the name of a single person is called Sole Proprietorship. That sole person is wholly responsible for the welfare of the entire business. The owner funds the business takes the profits and bear the losses. Do you know that companies like Coca-Cola, Apple, Hewlett-Packards, Amazon, etc. all started their company as Sole Proprietorship companies in India. 

5. One Person Company: One Person Company (OPC) is a newly proposed type of company and is introduced in the Companies Act, 2013 to support entrepreneurs who are capable of starting a venture by allowing them to create an entity by an individual. The main advantage of an OPC is that there can be only one individual in an OPC, while a minimum of two members is necessary for incorporation and maintenance of the company or Limited Liability Partnership.

An OPC is a separate legal entity as per company which offers limited liability protection to its shareholders and has continuity of business and is accessible to incorporate.

6. Section 8, a Company: According to Section 8, a company is an organisation which is registered as a Non-Profit Organization (NPO). NPO/company has its objective of promotion of arts, commerce, charity, education, protection of the environment, science, social welfare, sports, research, religion and intends to apply its profits, if any, or other income in promoting its objects.

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Business Marketing in India

By: admin Business 12 Apr 2019

India is said to be one of the largest consumer markets in the world, with its range of the vast population of middle-class consumers. India is a complex and diverse consumer market, and it is essential to develop marketing strategies and products as per the preferences of Consumer. As there is a massive competition from both small and large local retailers and international companies, it is necessary to consider the diversity of cultural backgrounds, differing levels of wealth and the sheer size of both the land mass and the population.

The best way to tackle the complexities of the Indian market for advertising purposes and marketing is to fund in and hire local knowledge. A complete marketing plan that considers core elements such as brand, stakeholder management, public relations, media, and the product or brand value proposition is essential. However, you will need to re-evaluate your marketing strategy and plan accordingly continually. The Indian socio-economic environment is continuously changing and evolving, which in turn impacts on consumer choices.

Awareness of Brand 

Indian economic-class consumers place strong importance on brands, particularly on luxury brands. Status is a crucial factor – particular people will purchase luxury goods only to show their achievement. You should have a specific strategy focusing on brand localisation, brand building, and awareness creation. 

Price Consciousness

For everyday commodities, the price is an important consideration for consumers, particularly at the lower-economical category and lower-income levels. As opposed to status items on which economically strong Indian buyers are willing to shell out more, non-status products are likely to be chosen based on price. 

Demographic Dynamics

India’s middle and upper-middle income households in major cities are needing quality across a wide range of services and products, especially those that focus on health and wellness, as well as education. The rural consumer market in India, is mainly underserviced at the moment for health and welfare of goods and services, education and other consumer goods and services, leaving ample opportunity for growth. 

Logistics

India is still a developing country which has a few highly developed logistics supply chain than in Australia and many of Australia’s traditional, more developed export markets. Less-developed infrastructure in some poorer regions, this may cause delays in getting goods to consumers and markets. 

Product and Service Adaptations

You might need to change your product to meet Indian requirements or preferences. Changing to regional regulations, tastes and cultural preferences mainly increases your chances of success.

Brand Marketing and Advertising

Language, symbolism and culture need to be studied when marketing and advertising in India. Advertising is subject to some regulation in India. Implementation of these regulations is not as strict as in some other countries unless an advertisement incites public outrage.

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