India Considers Removing Foreign Investment Caps on Limited Liability Partnerships

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Jul. 19 – India may consider removing caps on foreign direct investment for limited liability partnerships says a government source.

Authorities have been discussing the details of LLPs since last year.”The officials have reached a consensus for 100 percent FDI in LLPs,” the source told The Times of India.

An LLP is the preferred option for consulting and accounting firms because it imposes no limit on the number of allowable partners. It combines the features of a company and a partnership firm. There are 1,825 LLPs registered in the country so far.

However, LLP investments may not be allowed to go through the automatic approval route in order to prevent abuse. “If they start investing in sensitive sectors like defense, it may create security problems,” an official said.

India favors companies shifting to an LLP; for unlisted companies wanting to become an LLP, the government is cutting capital gains tax for the transfer of assets  as long as their turnover amount is under Rs. 6 million.