Limited Liability Partnership Agreement
A Limited Liability Partnership or an LLP Agreement is a legal document between two or more partners or businesses who agrees to establish, operate, and manage a business together to make a profit. The business model of a Limited Liability Partnership is very flexible and encompassing. It gives the benefit of limited liability to a Partnership Arrangement. Many partners can work together in an LLP arrangement to achieve a common objective.
LLP: A Separate Legal Entity
This is somewhat similar to the Partnership Firm. But, the LLP is a separate legal entity, which means its corporate structure distinguishes it from its member partners. The Limited Liability Partnership is solely liable to the full extent of its assets.
LLP: Limited Liability
However, It limits the liability of its partners to the agreed contribution in setting up the LLP. This was not the case with Partnership Firm. A Firm is a non-separate entity from its partners. The liabilities of partners in the Firm are determined through a Partnership Agreement. Therefore, if the Partnership incurs a loss or suffers a debt, the member partners are personally liable for the losses.
LLP: Perpetual Existence
An LLP can perpetually exist. Its existence is irrespective of changes in the member partners. An LLP can crash into contracts and hold the joint estate in its name on paper. Also, in an LLP, partners are not liable for the unauthorized actions of another partner. Individual partners are shielded from joint liability in an LLP. A partner is not responsible for another partner's wrongful decisions or misconduct.
LLP: Mutual Rights and Responsibilities
The LLP agreement issues regulations to govern the mutual rights and responsibilities of the partners within the LLP. But the LLP is not relieved of its liability as a separate entity. The Agreement describes the rights and duties of the member partners and the LLP. It also details the following:
- Asset-ownership in the LLP
- Profit and Loss distribution for each partner
- LLP Preparation for common business scenario
- Rules to manage and conduct the LLP operations
You can learn more about the LLP Partnership agreement or Deed format from the Registrationwala.
Drafting an LLP Agreement
LLP Agreement Draft
What is the Legal Document in a Limited Liability Partnership? It is the LLP Agreement. Every LLP aspirant must draft an LLP Agreement as a first step to ascertain the expectations and responsibilities expected from the partners. The LLP Agreement must cover the following in its format:
The LLP aspirant must choose and mention the legal name under which it will dispense its duties.
Purpose of Existence
The LLP aspirant must give a brief description of its business and operations.
Details of the Member Partner
Designated Partner means a person shares responsibility and commanding authority in matters of an LLP. The LLP aspirant must detail all its member partners' legal names and addresses. An LLP agreement can also be a Private Limited Company Partnership Agreement.
Powers of Designated Partners
The LLP aspirant must also mention its designated partners' names and assigned powers and authority.
Can an LLP take a loan from outsiders? The LLP aspirant is liable to mention all their resources, such as cash, property, services, and other resources each partner contributed to the LLP. They can take a loan from outside establishments.
The LLP aspirant must mention its partners' profit-sharing arrangement and ownership percentage.
Profit and Loss Distribution
The LLP aspirant must detail the distribution mechanism of the profits and losses of the LLP. This mechanism is often based on capital contributions and ownership interest.
Voting Methods and Requirements
The LLP aspirant must detail the management of the LLP, voting mechanism, and voting weight determination. The LLP must also declare the requirement of the majority votes to make important decisions about its finances and operations.
Incorporation and Dissolution
The LLP aspirant must also mention the guidelines for addition and insolvency and expulsion of partners from the LLP in the LLP agreement.
LLP Contract Deed format: All member partners must keep certified copies of the LLP Agreement. If any partner(s) suggest any changes in terms of the Agreement, then they must present it in writing.
You can access the LLP draft agreement in word format attached to the web page. For LLP closure, Form 24 can be used. To know more about the LLP contract deed format, consult Registrationwala.