What is a Limited Liability Partnership?
A limited liability partnership (LLP) is a body corporate with minimum 2 members . There is no maximum number of members that can be in an LLP. LLPs are governed by the Limited Liability Partnership Act of 2008, as opposed to Private Limited Companies and Public Limited Companies, which are governed by the Companies Act. These LLPs create and sign a common LLP agreement.
What is a Limited Liability Partnership?
- The LLP has perpetual succession and is a distinct legal entity apart from its partners. Any two or more individuals who are listed in the formation documents and have them properly submitted to the Registrar may establish an LLP.
- There should be a minimum of two designated partners, one of whom must reside in India. Any of the other partners may act as the LLP’s agents. The partners’ obligations must be compliant with the law.
- An LLP is governed by the terms of the LLP agreement, which is created during the LLP’s formation on comparable terms with each partner. It’s also important to remember that these fall under the 2008 Limited Liability Partnership Act. In the addition to of such an agreement, the act governs the parties’ respective rights and obligations.
- Due to the fact that an LLP is a separate legal entity, each partner is accountable for the LLP’s tangible and intangible assets as well as their respective agreed-upon contributions to the business.
- LLPs use an accounting system and trading disclosures that are comparable to those used by other business types.
- The provisions of the Indian Partnership Act, 1932 do not apply to LLPs.
The LLP Act of 2008 lists the following as an LLP's essential qualities:
- The LLP has perpetual succession and is a distinct legal entity apart from its partners. Any two or more individuals who are listed in the formation documents and have them properly submitted to the Registrar may establish an LLP.
- There should be a minimum of two designated partners, one of whom must reside in India. Any of the other partners may act as the LLP’s agents. The partners’ obligations must be compliant with the law.
- An LLP is governed by the terms of the LLP agreement, which is created during the LLP’s formation on comparable terms with each partner. It’s also important to remember that these fall under the 2008 Limited Liability Partnership Act. In the addition to of such an agreement, the act governs the parties’ respective rights and obligations.
- Due to the fact that an LLP is a separate legal entity, each partner is accountable for the LLP’s tangible and intangible assets as well as their respective agreed-upon contributions to the business.
- LLPs use an accounting system and trading disclosures that are comparable to those used by other business types.
- The provisions of the Indian Partnership Act, 1932 do not apply to LLPs.
An LLP’s members are only partially liable. Each partner in an LLP is not accountable or liable for the wrongdoing or negligence of another partner.
Definition of a Partner
A person who shares in the ownership and management of a partnership business is referred to as a partner. Partners typically split profits and losses according to an established ratio and are jointly liable for the debts and obligations of the LLP. Together, partners are also able to make management decisions and have the power to bind the partnership in legal disputes. A partner is, in essence, a co-owner of the LLP who shares management and financial duties.
Definition of a Designated Partner
A designated partner is a person chosen by the other partners to run the day-to-day operations of a partnership firm. The designated partner is in charge of adhering to various legal and regulatory requirements and has the power to sign documents on the firm’s behalf. An LLP in India is required to have at least two designated partners as a pers the Limited Liability Partnership Act, 2008 (LLPA).
What is LLP Agreement?
The Limited Liability Partnership Act-2008, which went into effect on 31st March, 2009, governs limited liability partnerships. There are 81 Sections and 4 Schedules in the LLP Act of 2008. A successful LLP partnership agreement currently requires the filing of numerous forms with MCA per the LLP Rules 2009 regulations.
Differences Between a Designated Partner and a Partner in an LLP:
- A partner is neither responsible nor liable for the payment of fines in the event that an LLP violates the LLP Act’s requirements. On the other hand, the Get more information about Designated partners in LLP have increased responsibility for the LLP’s fines in the event of non-compliance with regards to filing documents, returns, and account statements.
- A partner is not required for the LLP authority to obtain an identification number. On the other hand, the designated partners must possess a valid DPIN (Designated Partner Identification Number).
- Any individual or business can join as a partner in an LLP. However, a designated partner can only be assigned to an individual, in the event that all partners are body corporates then the nominees/ partners of such body corporates shall be designated partners.
- While partners act as the partnership firm’s agent, designated partners do so in addition while holding the position of director.
- Both general partnerships and limited liability partnerships make frequent use of the word “partner.” On the other hand, the term “designated partner” is only used in relation to LLPs.
- Following the creation of an LLP, designated partners have a greater obligation and liability to ensure that the LLP is operating in compliance with all applicable laws and regulations as well as its daily operations.
- A “partner” is anyone who enters into a partnership with other individuals. On the other hand, a designated partner is a partner who has been designated as such in the limited liability partnership’s governing documents as of the time of registration.
Similarities between the Designated Partner and the Partner:
- In an LLP, management and decision-making are done by both partners and designated partners.
- The debts and obligations of the LLP are owed by both partners and designated partners.
- Partners and designated partners are equally responsible for the LLP’s gains and losses.
- The LLP’s books of account are open to both partners and designated partners for access and inspection.
- The right to attend LLP meetings and cast a vote on significant issues is shared by partners and designated partners.
- A copy of the LLP agreement and other crucial documents for the partnership firm may be obtained by both partners and designated partners.
- With the consent of the other partners, partners and designated partners may transfer their ownership interests in the LLP to another party.