CA Foundation Exam > CA Foundation Notes > ICAI Notes- Incorporation of The Limited Liability
ICAI Notes- Incorporation of The Limited Liability - CA Foundation PDF Download
INCORPORATION OF LLP:
Essential elements to incorporate LLP - Under the LLP Act, 2008, the following elements are very essential to form a LLP in India:
(i) To complete and submit incorporation document in the form prescribed with the Registrar electronically;
(ii) To have at least two partners for incorporation of LLP [Individual or body corporate];
(iii) To have registered office in India to which all communications will be made and received;
(iv) To appoint minimum two individuals as designated partners who will be responsible for number of duties including doing of all acts, matters and things as are required to be done by the LLP. Atleast one of them should be resident in India.
(v) A person or nominee of body corporate intending to be appointed as designated partner of LLP should hold a Designated Partner Identification Number (DPIN) allotted by MCA.
(vi) To execute a partnership agreement between the partners inter se or between the LLP and its partners. In the absence of any agreement the provisions as set out in First Schedule of LLP Act, 2008 will be applied.
(vii) LLP Name.
Limited Liability Partnerships are bodies corporate and must be registered with the Registrar of LLP after following the provisions specified in the LLP Act, in a similar way of setting up a company with distinct name. The LLP cannot have the same name with any other LLP, Partnership Firm or Company.
To create a LLP proper formation documents must be filed with the registrar along with the necessary filing fees.
PROCESS:
Contents of LLP Agreement:
1. Name of LLP.
2. Name & address of Partners & Designated Partners.
3. Form of contribution & interest on contribution.
4. Profit sharing ratio.
5. Remuneration of Partners.
6. Rights & Duties of Partners.
7. Proposed Business.
8. Rules for governing LLP.
Steps to incorporate LLP-
DIFFERENCES WITH OTHER FORMS OF ORGANISATION:
Distinction between LLP and Partnership Firm: The points of distinction between a limited liability partnership and partnership firm are tabulated as follows:
Sr. No. | Basis | LLP | Partnership firm |
1 | Regulating Act | The Limited Liability Partnership Act, 2008. | The Indian Partnership Act, 1932. |
2 | Body corporate | It is a body corporate. | It is not a body corporate. |
3 | Separate legal entity | It is a legal entity separate from its members. | It is a group of persons with no separate legal entity. |
4 | Registration | Registration is mandatory. LLP can sue and be sued in its own name. | Registration is voluntary. Only the registered partnership firm can sue the third parties. |
5 | Perpetual succession | The death, insanity, retirement or insolvency of the partner(s) does not affect its existence of LLP. Members may join or leave but its existence continues forever. | The death, insanity retirement or insolvency of the partner(s) may affect its existence. It has no perpetual succession. |
6 | Creation | It is created by a legal process called registration under the LLP Act, 2008. | The death, insanity retirement or insolvency of the partner(s) may affect its existence. It has no perpetual succession. |
7 | Name | Name of the LLP to contain the word limited liability partners (LLP) as suffix. | No guidelines. The partners can have any name as per their choice. |
8 | Liability | Liability of each partner limited to the extent to agreed contribution except in case of willful fraud. | Liability of each partner is unlimited. It can be extended upto the personal assets of the partners. |
9 | Mutual agency | Each partner can bind the LLP by his own acts but not the other partners. | Each partner can bind the firm as well as other partners by his own acts. |
10 | Designated partners | At least two designated partners and atleast one of them shall be resident in India. | There is no provision for such partners under the Indian partnership Act, 1932. |
11 | Common seal | It may have its common seal as its official signatures. | There is no such concept in partnership. |
12 | Legal compliances | Only designated partners are responsible for all the compliances and penalties under this Act. | All partners are responsible for all the compliances and penalties under the Act. |
13 | Annual filing of documents | LLP is required to file: (i) Annual statement of accounts (ii) Statement of solvency (iii) Annual return with the registration of LLP every year. | Partnership firm is not required to file any annual document with the registrar of firms. |
14 | Foreign partnership | Foreign nationals can become a partner in a LLP. | Foreign nationals cannot become a partner in a partnership firm. |
15 | Minor as partner | Minor cannot be admitted to the benefits of LLP. | Minor can be admitted to the benefits of the partnership with the prior consent of the existing partners. |
Distinction between LLP and Limited Liability Company (LLC):
Sr. No. | Basis | LLP | LLC |
1 | Regulating Act | The LLP Act, 2008 | The Companies Act, 2013 |
2 | Members/Partners | The persons who contribute to LLP are known as partners of the LLP. | The persons who invest the money in the shares are known as members of the company. |
3 | Internal governance structure | The internal governance structure of a LLP is governed by agreement between the partners. | The internal governance structure of a company is regulated by statute (i.e., Companies Act, 2013). |
4 | Name | Name of the LLP to contain the word “Limited Liability partnership” or “LLP” as suffix. | Name of the public company to contain the word “limited” and Private company to contain the word “Private limited” as suffix. |
5 | Number of members/ partners | Minimum – 2 members Maximum – No such limit on the members in the Act. The members of the LLP can be individuals/or body corporate through the nominees. | Private company: Minimum – 2 members Maximum – 200 members Public company: Minimum – 7 members Maximum – No such limit on the members. Members can be organizations, trusts, another business form or individuals. |
6 | Liability of members/ partners | Liability of a partners is limited to the extent of agreed contribution except in case of willful fraud. | Liability of a member is limited to the amount unpaid on the shares held by them. |
7 | Management | The business of the company managed by the partners including the designated partners authorized in the agreement. | The affairs of the company are managed by board of directors elected by the shareholders. |
8 | Minimum number of directors/designated partners | Minimum 2 designated partners. | Private Co. – 2 directors Public Co. – 3 directors |
The document ICAI Notes- Incorporation of The Limited Liability - CA Foundation is a part of CA Foundation category.
All you need of CA Foundation at this link: CA Foundation
FAQs on ICAI Notes- Incorporation of The Limited Liability - CA Foundation
| 1. What is the process of incorporating a Limited Liability CA Foundation? |  |
Ans. To incorporate a Limited Liability CA Foundation, the following steps need to be followed:
1. Prepare the Memorandum of Association (MOA) and Articles of Association (AOA) of the foundation.
2. Obtain a Digital Signature Certificate (DSC) for the proposed directors of the foundation.
3. Apply for Director Identification Number (DIN) for the proposed directors.
4. Apply for the name availability of the foundation with the Registrar of Companies (ROC).
5. Once the name is approved, file the incorporation documents, including the MOA, AOA, and other required forms, with the ROC.
6. Pay the prescribed fee for incorporation and stamp duty.
7. The ROC will review the documents and if everything is in order, issue a Certificate of Incorporation, officially establishing the Limited Liability CA Foundation.
| 2. What are the benefits of incorporating a Limited Liability CA Foundation? | |
Ans. Some of the benefits of incorporating a Limited Liability CA Foundation are:
1. Limited Liability: The members of the foundation have limited liability, meaning their personal assets are protected in case of any liabilities or debts of the foundation.
2. Perpetual Existence: A foundation has perpetual existence, which means it continues to exist even if the members change or pass away.
3. Tax Benefits: Foundations enjoy tax benefits, such as exemptions on certain incomes and donations made to charitable causes.
4. Credibility and Trust: Incorporating a foundation enhances its credibility and trust among stakeholders, including donors, beneficiaries, and the general public.
5. Separate Legal Entity: A foundation is a separate legal entity, distinct from its members, which allows it to enter into contracts, own property, and sue or be sued in its own name.
| 3. What is the CA Foundation exam? | |
Ans. The CA Foundation exam is an entry-level examination conducted by the Institute of Chartered Accountants of India (ICAI). It is the first step towards becoming a Chartered Accountant (CA) in India. The exam is designed to test the foundational knowledge and understanding of subjects such as Accounting, Mercantile Law, General Economics, and Quantitative Aptitude.
| 4. How can I register for the CA Foundation exam? | |
Ans. To register for the CA Foundation exam, follow these steps:
1. Visit the official website of ICAI and create an account.
2. Log in to your account and fill in the required details in the registration form.
3. Upload the necessary documents, including a recent photograph and signature.
4. Pay the registration fee online.
5. Once the registration is complete, you will receive a confirmation email with your registration number and other details.
6. You can then proceed to fill the exam application form for the respective exam session.
| 5. What is the eligibility criteria for appearing in the CA Foundation exam? | |
Ans. The eligibility criteria for appearing in the CA Foundation exam are as follows:
1. The candidate must have passed the 10th standard examination or its equivalent from a recognized board.
2. The candidate must have registered with the Board of Studies (BoS) of ICAI for the CA Foundation course.
3. There is no restriction on the maximum age limit for appearing in the exam.
4. However, there is a minimum age requirement, which is 17 years as on the date of registration for the CA Foundation course.
Note: It is important to refer to the official notifications and guidelines issued by ICAI for the most accurate and up-to-date eligibility criteria.
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