In India, business entities have been mainly function­ing as companies, sole-proprietorships or partnerships, each being subject to different regulatory and tax re­gimes. However, now the stage is set for new types of corporate structures that would enable professional expertise and entrepreneurial initiative to collate, organize and maneuver in an efficient and resourceful manner. A process of introspection is currently underway in our legal and regulatory structures aimed at positioning a vibrant and dynamic India, at ease in its interactions with the world.  

The Government has taken crucial initiatives to empower the professionals by amending the Chartered Accountants Act, 1949 and framing the Limited Liability Partnership Law and a new Company Law, keeping in view the changing scenario and best global practices. The Limited Liability Partner­ship (LLP) Bill, 2008, which was passed by the Rajya Sabha on 24th October, 2008 and by the Lok Sabha on 12th Decem­ber, 2008, will particularly go a long way in empowering professionals.The enabling provisions of the Bill,framed articulately, based on the rec­ommendations and deliberations of various expert groups like the Abid Hussain Committee 1997, the Naresh Chandra Committee on Private Com­panies and Partnerships 2003, Dr. J.J. Ir: Committee on new Company Law, 2005, Stand­ing Committee on Finance 2007-08 etc. would provide the much-awaited and desired flexibility suited to the requirements of service, knowledge and technology based enterprises.    

An LLP would be a body corporate, having perpetual succession and a legal entity separate from its partners. Every partner of the LLP shall be an agent of the LLP but not of other partners. Under the proposed law, the accounts of the LLP shall be audited in accordance with such rules as may be prescribed and under the Draft Concept Rules, only a Chartered Accountant in practice can be appointed as an auditor. The Centre can exempt any class of LLP from this audit re­quirement. The introduction of Limited Liability Partnership (LLP) as an alternative business structure would pro­vide for a business format that would combine the flexibility of a partnership and the advantages of lim­ited liability of a company at a low compliance cost. As it would not impose detailed legal and procedural requirements intended for large widely held compa­nies, the LLP form would foster the growth of the services sector and provide a platform to the small and medium enterprises and professional firms to conduct their business/profession in tune with the best global practices.

Minister of Corporate Affairs Mr. Prem Chand Gup­ta, while laying the foundation stone of ICAl’s Centre of Excellence at Jaipur, had rightly said: “India will have its brand of global chartered accountancy firms. . . .now CAs can have as many partners in their firm as they want. . . so that they can also spread their firms across the globe. They will also be able to  pur­sue multi-disciplinary activities in a single firm, acting as a one-stop service centre. The Ministry of Corporate Affairs has assured that as regards taxation, the matter being related the Ministry of Finance, will be taken care of by that Ministry. Also, the Indian LLPs will in no way be put to any dis­advantage and our LLPs will have a level playing field with other similar bodies outside the country. The ICAI has already made a representation to the Ministry of Corporate Affairs suggesting that the law should pre­scribe a reasonable taxation regime limited Liability Partnership in consonance­ with the best global practices.

In most of the countries, including U.K. and Singapore, the LLPs are treated in the same manner as the Part­nership firm under the tax laws. To incorporate more flexibility, ICAI has proposed that an option may be provided either to tax the partners or LLP and that op­tion may be exercised in the first year of incorporation to indicate whether they will be taxed as partners or Firm or as a corporate structure. A recommendation has also been made that the law should prescribe pro­visions of carry forward of losses and un-absorbed depreciation, in case of conversion. In the present times when managing the chance and the growing expectations of the regulator’ and stake­holders are big challenges, this Bill inspires the pro­fessionals to gear up and build  up their strengths to tap plethora of opportunities and emerge as world leaders.

Source : ICAI