What are the differences between a partner and a designated partner in an LLP? Find out here!
A limited liability partnership (LLP) is a business with a minimum of two members and no upper limit on the number of members. The members of an LLP have limited liability. This article covered everything there is to know about LLP partners and designated partners in llp.
The Minimum Requirement for a Limited Liability Partnership (LLP)
- To begin the LLP formation process, you’ll need at least two partners
- One of the designated partners in LLP must be an Indian citizen who resides in India
- The office should be registered in India.
Partners in LLP
In the context of a limited liability partnership, a partner is defined as any person who joins the limited liability partnership in accordance with the limited liability partnership agreement.
A Partner Needs to Fulfill the Following Conditions
- He has to be a rational person
- He should not be an undischarged insolvent person.
Designated Partners in LLP
Designated partners in LLP are similar to private limited company directors. When compared to the director of a company, this partner in an LLP has more rights and privileges. The appointment of at least two ‘designated partners’ is required for all LLPs.
Conditions a Designated Partner Needs to Fulfill
- There must be two partners, both of whom must be individuals
- One of them must be an Indian citizen.
The Responsibilities and Liabilities of the Partner and the Designated Partners in LLP
Partners are agents of business
For the purposes of the LLP’s business, each partner is an agent of the LLP but not an agent of the other partners.
The act of partners does not bind LLP
The LLP is not bound by anyone or anything done by a partner in dealing with another person. If the partner did not have authority to do the act on behalf of the LLP and the person either knows that the partner did not have power or did not know or did not believe him to be a partner of the LLP.
Unlimited Liability in Case of Fraud to Creditors
If an LLP or any of its partners acts with the intent to defraud the LLP’s creditors or any other person or for any other fraudulent purpose, the LLP and the concerned partners’ liability is unlimited.
Designated Partners are Responsible for the Acts
The designated partner would be capable of carrying out all acts, matters, and things that the LLP is required to carry out in order to comply with the said act and would be liable for any penalties imposed on the LLP for any violation of those provisions.
Accountable for Compliance
In addition to their liability as partners, the ‘Designated Partners’ will be held accountable for regulatory and legal compliance.
In the case of vacancy of designated Partner
The LLP Act provides 30 days for filling a designated partner vacancy. If no designated partner is appointed, or if there is only one designated partner at any time, each LLP partner is deemed to be a designated partners in LLP. If the LLP fails to appoint designated partners, the Limited Liability Partnership and each partner will be fined.
In Case of Death of a Partner
If a partner dies and the business is carried on in the same LLP, the continued use of that name or of the deceased partner’s name as a part of it does not make his legal Advice representative or estate liable for any act of the LLP done after his death.
Contribution by the Partners
Money, tangible or intangible property, or other benefits such as promissory notes or contracts for services performed or to be executed may be included in the contribution. The LLP agreement governs a partner’s obligation to contribute money or property to an LLP. As a result, there is no requirement for a specific monetary contribution to become a partner. However, the forms filed with the ministry online do not allow for a zero contribution. As a result, it would be prudent to keep a nominal value of ₹ or 1000 (as appropriate) just to complete the process. The distinction between a partner and a Designated Partner is not significant; however, a fine line is prescribed that must be observed during the incorporation and inclusion of a person in a Limited Liability Partnership.
For more legal information, visit Vakilsearch.
Also, read:
