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Limited Liability Partnership (“LLP”) is a hybrid entity with advantage of a company and operational flexibility of a partnership. The concept was introduced by the Ministry of Corporate Affairs through Limited Liability Partnership Act, 2008 on 9th January, 2009.
Setting up of LLP in India has various advantages. Some of the significant advantages are as follows:
FOREIGN DIRECT INVESTMENT IN LLP Foreign investment is permitted under the automatic route in LLP operating in sectors/activities where 100% Foreign Direct Investment (FDI) is allowed through the automatic route and there are no FDI-linked performance conditions. As of now, payment by an eligible foreign investor towards capital contribution/profit share of LLPs is allowed only by way of cash consideration in terms of the Foreign Exchange Management Act, 1999.
In addition to the above, LLPs receiving FDI are also allowed to make downstream investment in other limited liability company or LLP in those sectors where 100% FDI is permitted through automatic route.
REPORTING REQUIREMENTS
Though, External Commercial Borrowings are not allowed in LLP in India, however, FDI norms relating to LLP are considerably liberalised as compared to investment in Indian companies.