Aimed at giving a boost to small and medium enterprises (SMEs) and services sector outfits, the Cabinet is set to consider clearing the Limited Liability Partnership (LLPs) Bill of 2006. The Bill provides operational flexibility for such enterprises by sparing them from detailed legal and procedural requirements intended for large widely held companies.
The legislation is expected to offer entrepreneurs the option to choose the tax structure depending on the size and nature of their business. It would also help Indian professionals provide accountancy and legal services globally, encourage entrepreneurship and take advantage of emerging opportunities in areas of science and technology.
The Bill states that LLPs can be formed for any trade, profession or occupation. It also seeks to allow LLPs established abroad to operate and conduct business in India . While foreign nationals would be allowed to enter into partnerships through LLPs, the Bill stipulates that at least one partner should be resident of India .
The need for such a law was felt due to the increasing role of services sector in the economy and a growing diversity in the range of services being offered. Various committees and expert groups including the Abid Hussain Committee (1997) for SSIs, Naresh Chandra Committee on Regulation of Private Companies and Partnerships (2003) and the Irani Committee on New Company Law (2005) had called for the introduction of LLP law in the country. LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be applicable to LLPs. The LLP structure is already used in the UK , USA , Australia and Singapore.