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LLPs has been withdrawn with immediate effect.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/
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