The recent amendments to the Limited Liability Partnership (LLP) Act will help entities operating in unorganised forms of businesses shift into organised structures, according to a senior official.
More than 2.15 lakh LLPs were active in the country at the end of July 31. Over 74 per cent of them were in the services sector, followed by industry and agriculture.
In the last financial year, there was a 17 per cent growth in terms of the number of LLPs incorporated in the country.
"LLPs have gained popularity in recent years and the recent amendments in the LLP Act will also result in increasing popularity of LLPs as unorganised and unincorporated forms of businesses will shift to an organised and incorporated business structure," Corporate Affairs Secretary Rajesh Verma said in the ministry's latest monthly newsletter.
He also noted that LLPs are increasingly becoming relevant as they help in augmenting India's global competitiveness and contributing towards inclusive growth.
The corporate affairs ministry is implementing the LLP Act and the Companies Act, among others.
LLPs have lesser compliance requirements compared to companies. Among others, they have to only submit the annual return and statement of accounts and solvency, and dividend distribution tax is not payable in case of an LLP and profits can easily be drawn out by the partners.
Earlier this month, Parliament cleared the amendments to the LLP Act, 2008.
"The amendments are primarily aimed at decriminalisation of 12 compoundable offences involving minor or technical defaults, omission of one penal provision and shifting another to an alternative mechanism...," the secretary said.
These changes will help in improving the ease of doing business as well as bring LLPs on a level playing field with companies, he added.
LLPs provide the benefits of limited liability of a company while giving flexibility of a partnership. This kind of alternate business form is beneficial for small and medium businesses and entrepreneurs in the services sector.
In March 2020, the ministry had launched the LLP Settlement Scheme for a specific period, wherein one-time condonation was allowed for delay in making statutory filings.
Verma noted that 1,05,643 LLPs benefitted by availing the scheme.
At the end of July this year, there were little over 22 lakh registered companies and out of them, nearly 14 lakh were active.
As per the newsletter, there were 13,90,228 active companies, including 2,23,282 companies, which were incorporated within the preceding 18 months.
"A total of 15,499 companies, including 950 One Person Companies (OPCs) were registered under the Companies Act, 2013 during July 2021 with authorised capital of Rs 2,986.32 crore," it added.
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