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What is Limited Liability Partnership Agreement?
An LLP Agreement is an agreement between two or more persons or entities that would like to manage and run a business together to make a profit.
Limited Liability Partnership i.e., LLP is one of the enterprise-class enterprise that offers the benefits of a limited corporate liability and the flexibility of the partnership. In LLP, fewer partners are able to work together (as opposed to a single owner). However, LLP is a separate legal entity, with full liability for its assets but the partner liability is limited to their agreed contribution to the LLP, in contrast to a partnership that is not a separate business partner and written down. by Title Deed. If the partnership has a legal obligation, the partners have a personal obligation to it.
LLP can continue its existence without looking at changes in partners. It is able to enter into contracts and hold assets in its own name. In addition, no partner is legally liable for the private or unauthorized actions of other partners, so individual partners are protected from a joint bond created by another partner’s wrong business decisions or misconduct.
The same rights and responsibilities of partners within the LLP are governed by the agreement between the partners or between the partners and the LLP as the case may be. LLP, however, is not exempt from debt for some of its obligations as a separate business.
An LLP agreement defines the same rights and responsibilities of partners between each LLP. It also identifies patent interest in LLP, defines the pros and cons of each partner’s distribution, prepares the LLP for normal business conditions, and incorporates other important rules regarding how the LLP will be managed and run the business.
In terms of the provisions of the LLP Act, 2008 if there is no agreement on any matter, the same rights and liabilities shall be as provided for in Schedule I to the Act. Therefore, in the event that any LLP proposes to exclude the provisions / requirements of Schedule I of the Act, it will be required to enter into an LLP agreement, which does not include the implementation of any or all of the provisions of Schedule I.
This document is an important document for running a new business and sets the business up for success by ensuring clear communication and defined obligations for all our partners. This Agreement sets out both emergency plans and descriptions of daily LLP activities. The LLP agreement provides some security for business partners and becomes a popular way to enter the business.
How to use this document?
An LLP Agreement can be created either as a first step to outline partner expectations and responsibilities before the partners begin doing business together and set up the LLP. The LLP Agreement will cover the following matters:
- LLP name: the legal name under which the LLP will do business
- Purpose of the LLP: a brief description of the business that the LLP will conduct
- Partner information: the legal names and addresses of all of the partners currently involved in the LLP
- Designated Partners and their powers: The names of the designated partners of the LLP and their powers
- Capital contributions: a description of the cash, property, services and other resources initially contributed to the LLP by each of the partners
- Ownership interest: a description of the percentage of the LLP owned by each of the partners
- Profit/Loss distribution: a description of how the profits and losses of the LLP will be distributed between the partners, often based on capital contributions and/or ownership interest, and how often distribution will take place
- Management and voting requirements: a description of how the LLP will be managed, how voting weight will be determined, and whether unanimous or majority votes will be required to make important decisions about the finances and operations of the LLP
- Partner addition and withdrawal: the guidelines for how the LLP will handle the addition of partners, the voluntary withdrawal of partners, and the involuntary withdrawal of partners
Once the LLP Agreement has been completed, all partners must sign and date the LLP Agreement. The signature of each partner must be certified by an independent adult, i.e., a person over the age of 18, who is not involved in LLP. This means that partners cannot prove it to each other.
Partners should keep copies of the LLP Agreement in their records. If partners wish to change any of the terms of the Agreement, they must ensure that they do so in writing.
Should LLP Agreement be registered to be valid?
Section 23 of the Act mandates the execution and registration of LLP Agreement within 30 days of incorporation of LLP. Every LLP Agreement must be executed on stamp paper of appropriate amount depending upon the amount of contribution and the state where its registered office is located at. Along with the stamp duty requirement, the agreement is required to be duly signed by all the parties and notarized by the authorities.
The liability is not just limited to the execution of the agreement, the said LLP Agreement is required to be filed with the registrar in Form 3 within the stated time period.
Are there any penalty provisions for non-execution of LLP Agreement in Time?
In case, there is any default on the part of the partners in registering the agreement with the Registrar. Then they are required to pay a penalty of rupees hundred for every day of such default.