Published Sat, 04 Mar 2023 | Updated Fri, 31 Mar 2023 Corporate Law
The self-agreed LLP agreement gives partners more flexibility and contractual freedom to satisfy their requirements and interests than an incorporated business structure does. In this Article we will cover all the nuances of LLP Agreement to get a better clarity:
As per Section 2(1)(O) of the Limited Liability Partnership Act, 2008 “Limited liability LLP Agreements mean any written agreement between the partners of the Limited Liability Partnership or between the Limited Liability Partnership and its partners which determines mutual rights and duties of the partners and their rights and duties in relation to that limited liability partnership.
It establishes the foundation for an effective Limited Liability Partnership. It describes the viewpoint and provides guidelines for making decisions on the contribution of partners, hiring of new partners, the firing of current partners, distribution of profits, roles and responsibilities and career adjustments without any ambiguity. Therefore, a complete, well-structured LLP Agreement establishes the framework and acts as the firm's backbone.
The LLP Agreement shall be executed between the partners and a copy of the signed agreement must be filed with the concerned Registrar of Companies (RoC) in e-form LLP 3 within 30 (thirty) days of the Registration of Limited Liability Partnership.
The LLP agreement specifies the obligations, privileges, rights, and authority of the partners towards the LLP and towards one another.
It establishes the framework for LLP's efficient operation.
It provides clarity and guidance while making decisions on crucial matters including whether to add a new partner or drop an existing one.
It unambiguously explains the management, operational, and administrative obligations.
Each Designated Partner's name, age, and accurate address must be mentioned in the LLP agreement.
Name of The LLP
This provision must declare that the LLP's operations must be conducted under the name and logo of LLP and not of individual partners.
Registered Office of the LLP
The LLP agreement must specify that partnership business must be conducted at the specified address, which will also serve as its registered office. Additionally, the company will operate from any other locations that the partners may from time to time agree upon.
Business of the LLP
The nature of the business that the LLP will be operating must be expressly stated in this section. It may also include any other business done in this way as determined from time to time by the majority of Partners.
Each partner's contribution along with the percentage of contribution must be included in this section. If any partner is making a non-monetary contribution, such as by offering services rather than money, include that information as well. Additional capital contributions made by the partner throughout the course of the agreement may also be included. This provision must also specify how the partners may withdraw their contributions.
Remuneration and Profit Sharing Ratio
The LLP agreement shall contain a clause regarding the amount of remuneration to the Designated Partner(s), for rendering the services as such as well as the percentage in which the profit and loss will be divided among the partners in the LLP must also be included in the LLP Agreement.
Rights and Duties of Designated Partners
The LLP Agreement must specify the various rights and duties of the Designated Partners as may be mutually agreed by them.
Admission of Partner, Retirement Resignation and Expulsion of Partners
LLP agreement must include appropriate guidelines regarding admission of new partners, retirement as well as the death of a partner, expulsion of partners etc.
Terms of Winding Up
The LLP agreement's duration of validity, whether it be perpetual or valid for a specific amount of time, must be specified by the partners. The agreement must also include instances in which the partners have consented to dissolve the LLP's affairs, either voluntarily or pursuant to a tribunal order for the particular infractions listed in Section 64 of the Act.
Draft the LLP Agreement incorporating the requisite clauses with utmost clarity and print it on the Stamp Paper of Requisite Value (Stamp duty to be paid on the LLP agreement is dependent on the state of incorporation and amount of capital contribution from the partners)
All the Partners are required to Sign the LLP Agreement.
Witnesses of each party will sign the last page of the Agreement.
Get the LLP Agreement notarised by a Notary Public.
File the Copy of Agreement with the concerned Registrar of Companies (RoC) in e-form LLP 3 within 30 (thirty) days of the incorporation of LLP.
Each Partner should keep a copy of the LLP Agreement.
An LLP Agreement is similar to the Memorandum of Association and Articles of Association of a Company. It serves as an LLP's charter. Not only does it define the partners' rights, responsibilities, and obligations, it also describes the nature and extent of the LLP's operations. Alteration refers to making adjustments to the initial agreement submitted to the ROC, such an altered LLP Agreement is generally termed as “Supplementary Altered Agreement”.
A properly drafted and executed LLP agreement reflects the Each Partner's Common Goals for the LLP and for the partners themselves. An LLP agreement will outline the LLP's operating processes. Therefore, an LLP Agreement must be drafted with utmost care and responsibly covering all of the relevant areas for the proposed business. If you have any questions concerning your LLP, an LLP agreement, or setting up an LLP, please contact CompaniesNext for the best answers.