• Valuation of LLP

Me and my mother are 60% and 40% partner in LLP. I need to involve my father (relative) as a 40% partner in my LLP as I want to exit and I'm an NRI. The LLP has a property worth 1.5 Cr. I'm planning valuation based on the Capital left in the company and that is10 Lakhs for 40% partnership. The current capital is of the company is 15 lakhs. So If he brings 10 lakhs he becomes 40% partner. Considering I'm a relative in the business I'm not taking the cash and the property assets to make the valuation. Eventually, I'm the only son and once the assets are sold they will repatriate the money to be in the UK.

Q: is that Correct?
Q: Will there be tax implication on LLP me or father
Q: Will any Benami law will get triggered?
Asked 3 years ago in Income Tax

- It seems that you want to close the LLP, sell the assets and take the proceeds out of India. There is no need to change the structure of contribution or partners. Capital asset sold by the LLP will be taxable under Income tax under the head capital gain. GST aspect will also need check on such sale. Payment from LLP in excess of capital to partners is also important. my email is aroravivek1982@gmail

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

Hi

 

We may assist you please have a phone consultation for details discussion.

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

Dear Sir,

 

Though the exact answers would depend upon the analysis of complete facts in detail, the preliminary responses are as under:

 

1. The arrangement is valid. However, your retirement and your father's admission as partner in the LLP would have capital gain tax implications. To avoid this, you may simply gift your interest in the LLP to your father, since gift to a relative is exempt under the Income Tax Act. (Transfer of interest is not allowed in case of a simple partnership, but is allowed in case of a LLP, as per the LLP Act. A partner can transfer his interest in the LLP to someone else without actually retiring and admitting the other person). In this manner, there won't be any capital gain implication due to reconstitution of LLP.

 

2. On sale of property by the LLP, there will be capital gain tax implication in the hands of LLP. When such profit would be distributed by the LLP, there won't be any tax implication in the hands of partners.

 

3.  The entire arrangement is legal and Benami laws will not get triggered.

 

Best regards,

CA Yogesh Malpani

Rajvinder Sahni
CA, Mumbai
49 Answers
7 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

1. Yes, it is correct.

 

2.The tax implications will be on LLP.

 

3.No.

 

We may assist you in entire procedure.

 

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Dear Sir,

 

At the time of repatriation, ideally the money should first be repatriated from the LLP to your father's account and then your father should gift the money to you, instead of the LLP repatriating directly to you.    

 

Even if the LLP repatriates directly to you, there would not be any problem since it would be transfer by overriding title, which is a valid transfer. Since the money would be legitimate and there is no tax evasion involved, you need not worry at all.

Rajvinder Sahni
CA, Mumbai
49 Answers
7 Consultations

5.0 on 5.0

- Your father can repatriate the amount to your account. File Form 15CA as you are NRI.

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

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