The ministry of corporate affairs has said that out of the eight lakh companies in India, a large chunk of them would be interested in getting converted into limited liability partnership (LLP) once a suitable tax structure for LLP is brought in.
We are getting enquiries from thousands of companies every week who are interested in LLP and are waiting for its tax-structure. The tax-structure would be provided in the next Finance Bill by the ministry of finance and once this is through, then large numbers of companies are going to convert into LLP, a MCA official told FE.
According to the ministry, one of the main reason for a rise in demand for LLP is that its tax liability and compliance cost will be less in comparison to companies.The tax slab for LLP will be lower than the present corporate tax slab and the government will consider exempting profit up to a particular level from the tax liability.
Anurag Goel, secretary, MCA said, “In a couple of years, I see lakhs of LLPs coming in.” Apart from the flexibility between the partners, there is also a provision of a foreign national as a partner, which is not possible at present.
To make the working of LLP easy, the government has introduced an e-governance mode, which will enable the LLPs to make use of its services anytime and anywhere. Apart from this, there has been a new portal of LLP launched by Corporate Professionals, a leading corporate legal and financial advisory firm, which will act as a facilitator for LLP.
LLP has an advantage of giving the ownership of assets to the partners where a partner can use his asset anytime and exit from the LLP. At the time of the exit, he will be in a position to easily take out his money without the LLP being dissolved.
There can be diverse activities under the LLP umbrella. Even chartered accountants, cost accountants, company secretaries, lawyers, and others can all come together as partners and form an LLP which is otherwise not possible.
The LLP will involve signing of an agreement with the assigning of the responsibilities to the partners where every partner is aware about his or her share of responsibilities.
In case of LLP, there is also no hard and fast rule of preparing a balance sheet as maintaining a simple statement of account is also enough.