Registered under Limited Liability Partnership Act, 2008, Limited Liability Partnership shall be entitled to allow Foreign Direct Investment in LLP according to the prerequisites provided in Annex I. Any individual who is a resident of any country outside India or any establishment outside India can carry out Foreign Direct Investment in LLP in India. FDI in LLP is allowed through the government approval route in the sectors where 100% Foreign Direct Investment is allowed and also through the automatic route.
Limited Liability Partnerships with Foreign Direct Investment are not allowed to function in some sectors which include print media , agricultural activity and real estate business. Apart from this, Limited Liability Partnerships with FDI are also not allowed to indulge in the downstream investments (indirect foreign investment).
When it comes to funding of LLPs, any foreign entity investing in the capital structure of the LLPs is allowed only by way of cash considerations, received by inward remittances via banking channels, or by debit to NRE/FCNR account of the individual concerned further associated with an authorized dealer or authorized bank.
On the other side, consent of government will be needed in order to make intangible contribution towards the capital of the Limited Liability Partnership. LLP preferring FDI is required to have a designated partner “resident in India”, as defined under the ‘Explanation’ to Section 7(1) of the LLP Act, 2008 .
As there is a relaxation in the FDI norms for investment in Limited Liability Partnerships in India, Foreign Nationals and NRIs can be registered as LLPs provided the annual sales turnover is less than Rs.40 lakhs and the capital is less than Rs.25 lakhs. The best part is that if LLPs successfully meet the mentioned prerequisites, they need not appoint an Auditor or conduct Board Meetings.
As far as civil aviation and construction development sectors are concerned, NRIs enjoy special waivers for investment in these sectors. Also, the investment made by a NRI as per the schedule 4 of FEMA regulations, deems to be domestic investment in equilibrium with the investment made by residents.
When it comes to the ownership of the LLPs, the LLP Act 2008 states that at least one designated partner needs to be an Indian resident. In other words, section 7 of the LLP Act 2008, states that the term “resident in India” implies an individual who has resided in India for not less than one hundred and eighty-two days during the immediately foregoing or previous one year.
Government of India has truly made a welcome move by allowing FDI in LLP. With this, foreign investors have been provided with an alternate form of business other than company which would further allow them to be benefitted with tax efficient LLP structure.