Limited Liability Partnership is governed by the provisions of the Limited Liability Partnership Act 2008.
Limited Liability Partnership (LLP) is a new corporate structure that combines the flexibility of a partnership and the advantages of limited liability at a low compliance cost. It is an alternative corporate business vehicle that provides the benefits of limited liability, but allows its members the flexibility of organising their internal management based on a mutually arrived at agreement, as is the case in a partnership firm.
Companies may be limited by:
limited to the amount unpaid on their shares;
is limited to the amount guaranteed which may or may not have share capital
The most commonly used form in India is a company limited by shares.
Companies may be incorporated as private companies or public companies. A private company may also be incorporated as a one-person company.
A company may be a listed company (whose securities are listed on a recognized stock exchange in India), or unlisted.
Incorporated entities in India are governed by the provisions of the Companies Act.
A Private Company has the following features:
A private company is required to have 2 directors.
A public limited company does not need to satisfy any minimum paid-up share capital requirements. It is defined as a company which is not a private company.
A public limited company shall have a minimum of 7 members and three directors. A public company can be wholly owned or a joint venture.
A private company, which is a subsidiary of a public company, is also considered to be a public company.
A public limited company may also list its shares on a recognized stock exchange by way of an IPO. Every listed company shall maintain public shareholding of at least 25%.
One-person companies shall have only one member and, unless otherwise expressly excluded, all the provisions related to a private company shall apply to a OPC.
Salient features of a one-person company:
This is the simplest form of business. No formal business registration is required under Indian law. However, the sole proprietor may be required to obtain a license specific to the line of business. The owner of a sole proprietorship is personally entitled to all the profits and responsible for all the losses arising from the business.
The Indian Partnership Act, 1932 is an act enacted by the Parliament of India to regulate partnership firms in India.
The main features of The Indian Partnership Act, 1932 are as follows:
Companies incorporated outside India can set up Branch Offices in India with specific approval of the Reserve Bank of India. Such Branch Offices are permitted to represent the parent / group companies and undertake the following activities in India:
A Liaison Office (also known as
Representative Office) can undertake only liaison activities. It is not allowed to undertake any business activity in India and cannot earn any income in India. Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India.
Setting up a liaison office in a sector in which 100% FDI is allowed under the automatic route requires the prior consent of the RBI. For the remaining sectors, RBI grants its approval after consultation with the Ministry of Finance.
A Project Office is a place of business established to represent the interests of a foreign company executing a project in India. Such offices are prohibited from undertaking or carrying on any activity other than the activity relating, and incidental, to the execution of the project for which such office is established.
The Reserve Bank has granted general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company to execute a project in India, and
If the above conditions are not met, RBI approval must be sought. The tax on project offices is 40% plus applicable surcharges and cess.
A trust arises when one person (the “trustee”) holds legal title to property but is under an equitable duty to deal with the property for the benefit of some other person or class of persons called beneficiaries. Like a partnership, a business trust is not regarded as a legal entity. The trust, as such, does not incur rights or liabilities.
A foreign company can invest in an Indian company through a joint venture agreement (or as a wholly owned subsidiary) in the areas which are not otherwise reserved exclusively for the public sector or which are not under the prohibited categories such as real estate, insurance, agriculture, and plantation.
Association of persons is a group of persons who join for a common purpose and associate themselves in an income producing activity. Persons for such association includes:
The purpose of an AOP varies and hence there is no mandated registration procedure. AOPs shall register under various acts governing incorporation, depending upon the purpose behind incorporating such an AOP.
A Body of Individuals is a group of individuals who come together for a common purpose. Such common purpose may or may not be to earn income. A BOI may not be formed out of a common will or an intention.