SAY NO TO TAX RETURNS...!!

No income tax returns would be required for salaried persons earning up to Rs.5 lakh per annum.

This rule is applicable only for salaried class whose tax has been deducted from source by their employers. They need to file return if they are claiming any refund of taxes. Again they will have to file return if they have not disclosed their income from other sources like dividend, interest etc to their employers for tax deduction. The form 16 issued by their employer will be considered as their return of income for this purpose....

LLP and CA Firms

A Limited liabilty partnership can now be a statutory auditor of a company, thanks to the Ministry of Corporate Affairs. The ministry has now clarified that LLP of Chartered Accountants will not be treated as 'body corporate' for the limited purpose of section 226(3)(a) of the COmpanies Act. An executive order to this effect has been issued. The CA institute had represented to the Minsitry that the Limited Liability Partnership law of 2008 specifies a LLP as a body corporate. Hence, LLP among chartered accountants will not be qualified for appointment as auditor by a company, the CA institute had submitted. By taking LLP out of the purview of 'Body Corporate' for the limited purpose of appointment of auditor, the Government has enabled conversion of more CA firms into LLPs.

(source : businessline)

LIMITED LIABILITY PARTNERSHIPS AND LIMITED COMPANIES (Part II)

Through my last post i indicated the advantages and disadvantages of Private limited companies and Partnership firms which are the most popular form of organisations in India. Through this post we will have a look at the new form of organisation and how it brings the good elements of partnership firms and limited companies. LLP stands for Limited Liability Partnership. The name itself shows that it is a mixture of Limited company and Partnership. In middle east and other parts of the world, it is commonly known as LLC or Limited Liability Company.

How it solves the drawbacks of Partnership:

(a) Separate legal status : LLP has a separate legal status from its members whereas partnership firm doesnt possess this. The separate legal status allows the LLP to own property, to sue others and to be sued by others, transfer property etc thus providing a complete corporate status to the organisation whereas this element is missing in partnership. In partnership the organisation's existence completely depend upon the members. It has no separate legal status.

(b) Limited Liability : The member's liability in the case of an LLP is limited to the extent of amount remaining unpaid on the agreed amount of contribution. That means the creditors cannot make his estate liable for the debts of LLP. This feature is not present in Partnership firms and hence a partner can be made personally liable for the debts of partnership firm. This corporate facade is the highlight of LLP.

(c) Number of Members : A partnership firm can have a maximum of 20 members whereas LLP can have UNLIMITED number of members...!! That means LLP has got similar status of a public limited Company and hence the resources are unlimited. The above said features makes LLP a much preferable form of organisation than Partnership firms.

LLPs and Private Limited Companies (Part 1)

LLP is a new form of organisation introduced through LLP Act 2008 and enacted on 7/01/2009. LLP stands for Limited Liability Partnership which bring the best features of Partnership firms and Limited Companies.

Need of the Hour !

Before the introduction of LLP, we had mainly two forms of organisations (works for profit). Limited Companies and Partnership firms. Both had their own drawbacks and advantages. Lets analyse these one by one...

(a) Partnership firms : Partnership firms are governed by Indian Partnership Act 1932. It doesnt mandate the registration of partnership firms. It gives the partners a lot of freedom since the act gives freedom to the firm and its partners to design and enact major rules and regulations for internal proceedings through the Partnership deed. And its formation is easy and less expensive as it requires only a stamp paper (the stamp duty varies from state to state in India, at an average Rs.1000/-) and the drafting of the deed. Registration is not compulsory but registration gives the authority to sue third parties and hence it is recommended. Registration is really cheap since it required only Rs.15/- (Rupees Fifteen Only) and it is done with Registrar of Firms of respective states.

When we look at the draw backs of Partnership firm, its unlimited liability stands first. Unlimited liability stands for the creditors right over the personal estate of the partners in case of winding of the firm. That means the partners are personally liable for the activities of the firm. This situation is there because the firm doesnt have a separate legal status apart from its members. It doesnt have a corporate status. The maximum number of persons that can be partners in a firm is restricted to 20. that means the resources available is limited. At this juncture, lets analyse about limited companies..

(b) Limited Company : Companies Act 1956 (Section 3(1)(i)) defines a company as a company formed and registered under this Act or an existing Company. Companies have a corporate status, which means it is separated from its members. Company itself is a legal entity and hence it can own and transfer property and can sue as well as sued by others. This feature of a Company gives its members the advantage of limited liability. Members liability is limited to the amount remaining unpaid on the face value of shares. On the basis of number of members and restrictions imposed by Sectin 3(1)(iii) of Companies Act 1956 they can be further divided into two,ie, private limited and Public Limited Companies. Maximum number of members allowed in a private limited company is restricted to fifty and whereas in a public limited company it is unlimited. Hence these features allows to overcome the disadvantages posed by Partnership firms.

The disadvantage of a limited company is the statutes governing it. The laws are very strict and hence the flexibility of the organisation is very low compared to partnership firms. Law has its claws even on each and every internal proceedings. So for a small organisation it is very difficult to follow these rules and sometimes members ignorance of law may stand against him. In a country like India where ignorance of law is not considered as an excuse, it may be a costly affair. And maintenance and formation of limited company is also at an higher end.

Thus, in this liberalised and investor friendly environment there comes a need of new form of organisation which has all the better sides of these two very popular forms of organisations to boost the confidence of investors. As solution for this Limited Liability Partnership Bill was introduced in Rajya sabha on 15/12/2006 and was referred to the Parliament Standing Committee for suggestions. A new revised bill, called LLP Bill 2008 was introduced in Rajya Sabha on 21/10/2008 and was passed 24/10/2008. Loksabha also passed the bill on 21/12/2008 and finally enacted on 7/1/2009.