The LLP agreement is an important document if you are entering into a partnership. This article explains the process of how to change or amend an LLP agreement
What is a Limited Liability Partnership Agreement?
A limited liability partnership (LLP) is a partner-based business that does not have common ownership or control of its assets. Instead, it is owned by all the partners, who take turns running the business based on how much money they contribute each year.
The LLP’s legal structure makes it an association rather than a corporation or a company. This means it does not have separate financial accounts, and business expenses are instead charged against the general partners’ shares. Instead, all business expenses are considered partner income and are therefore deductible for each partner.
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LLP Agreement Amendment Format
The partners must vote on a resolution to make substantive Modifications to the LLP Agreement. Form-3 must be filed with the Registrar within 30 days of the resolution’s passage. Form 3 should contain the following information:
- Date of LLP agreement modification (if there has been any)
- Reason for the modification in the LLP agreement sample in case of a change due to a change in a partner, a change in the business activities, a change in profit sharing, or any other change in matters related to duties and rights of partners.
The partner’s liabilities, including the inclusion and retirement, can be stated in the indemnity clause. It is possible to include the partner’s retirement in the clause. A person may resign and be expelled at the same time. Some disputes and solutions may occur between the partner and the LLP. Some of these possibilities are voluntary winding up, the LLP’s termination, and the duration of its existence. After the LLP agreement format change, industrial activity may be divided differently.
It is required to submit form-4 with form-3 (if the change in the LLP structure is due to the addition or deletion of partners or designated partners) or if the change in the LLP structure is due to an alteration of the partners or designated partners. In the case of the creation, ceasing, or changes in the partnership/partner’s name or role, it is required to file an F4.
Documents Checklist for the Modification to the LLP Agreement
All the below-mentioned documents have to be filed to make alterations to the LLP contract.
Documents to be enclosed with Form 3
- Original LLP Agreement
- Modified LLP agreement
- Supplementary Deed
- Resolution regarding the changes to be made, which is passed in a Change in LLP Partners
- Any forms or documents required as proof
Documents to be enclosed with Form 4
- Consent of each of the partners
- An affidavit or other proof of a change in name
- Evidence of cessation
- If any of the partners is a company, the copy of the resolution in this regard
- Copy of authorisation/resolution mentioning the name & address of individuals(s) nominated as a representative of the partner/nominee
Conditions for Exercising Limited Liability Partnership Rights
If a limited partner wants to exercise limited liability partnership rights, they must sign a new partnership agreement. The most important change in a new or amended limited liability partnership agreement is that the limited partner now has a choice of law provided for the formation of the partnership.
Key Changes to a New or Amended Limited Liability Partnership Agreement
The key changes to a new or amended limited liability partnership agreement relating to the following:
Code of Conduct and Standards of Conduct: The partnership agreement to form a limited liability partnership must include a code of conduct that the partners must follow. This code can be as detailed as the partners desire. Still, it is generally required to include things such as notifying the IRS if the partnership is making a contribution to a qualified charitable organisation, prohibiting harassment and discrimination, and prohibiting the use of misleading or inaccurate information in the partnership agreement.
Tax Matters: A new or amended limited liability partnership agreement must address tax issues peculiar to a partnership, such as the number of deductions and credits available to a partnership and the partnership’s obligation to report income or losses to the IRS.
Other Considerations for Introducing Modifications to an LLP Agreement
It would be best if you considered the following considerations when introducing changes to an agreement still under negotiation or signature.
Duplicate Provisions: Although you are free to modification of the partnership agreement at any time, you should generally avoid duplicating provisions. Duplicate provisions can create uncertainty for the partnership and lead to one of the partners challenging the agreement in court.
No Trustee – A new or amended partnership agreement does not require a new trustee, although you should generally hire one if you are setting up a new LLP Incorporation. You should generally name a trustee if there is one in the partnership agreement: https://www.mca.gov.in/content/mca/global/en/contact-us/roc.html.
How Vakilsearch Can Help in Making Modifications to the LLP Agreement
Making Modifications to the LLP Agreement is a long process. It involves a lot of forms and legacies that must be up to the mark to make the amendments effectively. Experts at Vakilsearch deal with nearly 1000 companies monthly and help them in multiple legal processes. With our document editing service, you can get expert lawyers to work on your documents until you’re completely satisfied. You can track the progress on our platform at all times and see the current stage of the job. Reach out to experts at Vakilsearch right now.
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