Any written agreement between the partners of the LLP or between the LLP and its partners which determines the mutual rights and duties of the partners and their rights and duties in relation to that LLP. It is not necessary to enter into an LLP agreement as per LLP Act, 2008. In the absence of LLP agreement, the mutual rights of corporate, at least two individuals who are partners of such limited liability partnership or nominees of such bodies corporate shall act as designated partners.
Accounts and Audit
LLP is required to maintain books of accounts for each year on cash basis or on accrual basis. Accounts shall be audited by Auditors appointed by the LLP. Audit of accounts is compulsory if turnover exceeds Rs. 40 lakhs in any financial year or contribution by partners exceeds Rs. 25 lakhs.
The Statement of Accounts and Solvency for the year ended 31 March is required to be filed with the Registrar before 30 October in each year.
Any person guilty of an offence under this Act for which no punishment is expressly provided shall be liable to a fine which may extend to five lakh rupees but which shall not be less than five thousand rupees and which may extend to fifty thousand rupees for every day after the first day after which the default continues.
Taxation of a Limited Liability Partnership
LLP registered in India will be a resident even if only a part of control and management is in India. Profits distributed by LLP exempt in the hands of the partners. As per the Finance Bill, 2009, the income of an LLP is taxed only the hands of LLP and not the Partners. The entire taxation of LLPs is similar to the existing taxation pattern applicable to Partnerships registered and formed under The Indian Partnership Act, 1932. Dividend distribution tax is not applicable in case of LLPs, whereas it is 15.00%(plus surcharge @ 5% plus education cess @ 2% plus SHEC @ 1% of amount so declared, distributed or paid) in case of companies. Wealth Tax (which is currently @ 1%) is not applicable to LLPs.
Filing Procedure for LLPs
For income tax purposes, the filing procedure of an LLP is similar to that of a partnership. The precedent partner reports the capital contribution of the partners in the tax return for the purposes of applying the relevant deduction restriction.