Manufacturing Activities in LLP – Restriction withdrawn by MCA

The LLP is preferred form of organization due to its hybrid nature of being Body Corporate with limited liability of its partners. Further, the LLP has less compliance and cost effective for small and medium scale enterprises.

Recently, CRC office of Ministry of Corporate Affairs (MCA) was raising objection on  incorporation of LLP with manufacturing activity stating that manufacturing activities does not fall under the definition of business as per “Limited Liability Partnership Act, 2008”(Hereinafter referred as “the Act”).

Definition of Business as per LLP Act, 2008 

Sec. 2(e) "business" includes every trade, profession, service and occupation;

Business means commercial activity with the intention of profit 

Occupation means - a person's usual or principal work or business, especially as a means of earning a living;

The definition of “business” is inclusive in nature, not comprehensive. As the Definition of business is inclusive in nature, it does not restrict/exclude manufacturing activities. Further, no restriction is provided in the provisions of the Act or Rules made thereunder as well. If the manufacturing activities are restricted in the LLP form, it would have been unnecessary hindrance.

Considering this and various representations received by Ministry (MCA), the restriction of manufacturing and allied activities in LLPs has been withdrawn with immediate effect.

Source: http://www.mca.gov.in/