A Limited Liability Partnership or commonly called as LLP is a type of Partnership. In this partnership the liability of the partners are limited to the extent of their share of investment in the partnership firm. There is no liability attached to the personal assets of the partners. Hence, it is a safe mode of running one’s business without the fear of losing one’s earnings in case the business runs into loss. In India, all LLps are governed by the Limited Liability Partnership Act, 2008. Hence, it is mandatory that all LLPs should make an agreement.
How To Make An LLP Agreement
To make your LLP agreement follow these guidelines:
Draft the agreement and print it on a Stamp paper of due value
All partners should sign the agreement at the bottom of all pages
Two witnesses should sign the agreement at the end of the document
Register the agreement at the Sub-Registrar office paying the appropriate registration charges according to the State rules
Each partner should be provided a copy of the agreement
What Should Be Included In The LLP agreement
An LLP agreement should be made with utmost care. The main clauses and terms and conditions should be clearly mentioned. These are some of the points to include in the LLP agreement:
The name, age and address of each partner should be mentioned correctly.
The name and address of the partnership firm should be correctly mentioned.
The type of business and place of business should be added.
The type of partner (Designated or Sleeping Partner) should be clearly mentioned.
The details of the Designated partner should be given accurately.
The deed should include main clauses about the role of each type of partner, the capital investment of each partner, the profit and loss sharing percentage of each partner, the running and maintaining expenses of the firm.
The terms and conditions when a partner is retiring or outgoing or incoming or the death of the partner should be elaborately written.
Clauses regarding minor partners if any should also be clarified.
The conditions of dissolution of the firm and its consequences should also be mentioned.
How To Make It Legally Valid
Once you have drafted the agreement the next step is to see that the agreement is made legally valid. For this you have to carry out the following steps:
The draft should be made on a Stamp paper of due value
The document should be signed by each partner in the bottom on all pages
Two witnesses should also sign the document in the end of it
The deed should be registered with the Registrar of companies by paying the appropriate registration charges
For process of registration, click the link at the bottom of the page.
Frequently Asked Questions
What is so special about an LLP?
An LLP is a convenient system of starting one’s own firm without the worry of losing one’s personal assets in case the business goes into loss. Here, the liability of each partner is limited to only his share in the capital investment made by him. Hence, if the business undergoes any loss his personal property cannot be attached to clear the liabilities. You could say that LLP has the benefits of a Private Ltd Company but the difficulties in the process of registration are kept simple.