Designated partners are analogous to directors of a private limited business. However, in comparison LLP partner has more rights.
A designated partner is a partner in a partnership who has been given additional obligations or rights by the other partners. The designated partner may be accountable for management choices in some partnerships, while in others they may merely have a stronger say in how the partnership is conducted. The designated partner may be in charge of the partnership’s finances as well.
A designated partner is a partner who has been given specific obligations by the other partners. Depending on the partnership agreement conditions, a designated partner may have limited liability for the partnership’s debts and responsibilities.
|A designated partner can only be nominated if there are two or more partners in the business. If just one partner is present in an LLP, that individual is automatically considered a designated partner.|
Is it Mandatory to Appoint a Designated Partner in an LLP?
For all LLPs, the appointment of at least two ‘designated partners’ is necessary. The Limited Liability Partnership Act of 2008 stipulates a minimum number of Designated Partners for LLP registration and for the duration of the LLP’s operation. According to the Act, a Limited Liability Partnership must be formed with at least two individual Designated Partners, one of whom must be a resident of India.
It’s also worth noting that if the incorporation document doesn’t specify designated partners and instead states that each of the partners will be the designated partner from time to time, then every such partner will be a designated partner.
Similarities and Differences between a Designated Partner and a Partner in an LLP
In a limited liability partnership, both the partner and the designated partner are accountable for all acts, matters, and things that must be done (LLP). In a Limited Liability Partnership (LLP), designated partners have the same responsibilities as partners. They also serve in the same capacity as a director in a corporation. They are bound by the LLP agreement’s reciprocal rights and obligations. However, there are certain differences between the definitions and functions of partners and designated partners in an LLP, as follows:
- In general partnerships, partners are referred to as partners, whereas in limited liability partnerships, participants are referred to as designated partners
- A partner’s responsibilities, rights, and liabilities are often outlined in a partnership deed, whereas a designated partner’s responsibilities, rights, and liabilities are outlined in the LLP Agreement
- A partner’s liability to third parties is unlimited and extends to his personal property, whereas a designated partner’s obligation is limited to the capital they contribute or as stated in the LLP Agreement
- Designated partners are exclusively responsible for the administration and execution of all acts and things required of the LLP, including compliance with the LLP Act’s regulations such as submission of paperwork, returns, and statements. Partners in an LLP, on the other hand, are not liable for such conduct and are only obligated to contribute to the LLP.
|The designated partner identification number, abbreviated as DPIN, is a number assigned by the MCA to eligible designated partners who apply for it. The DPIN must be included in all applications filed with the Ministry of Corporate Affairs when a person is appointed as a designated partner.|
Eligibility of a Designated Partner
If a person wants to join an LLP as a designated partner, he must first meet the necessary qualifications. Let’s have a look at some of the most important prerequisites for becoming a designated partner in an LLP:
- The person must be at least eighteen years old.
- An LLP can have any number of partners, including individuals and corporations.
- A unique identification number is required for anyone who intends to become a partner (For instance, Aadhaar Card)
- A minimum of two designated partners are required in every LLP.
- The individual must be of sound mind.
- Fraudulent activities should not have been committed by the individual.
- A minimum of one designated partner must be an Indian national residing in India.
- The other Designated Partners must provide a consent letter with documentation and other papers.
- In the last five years, the individual should not have been declared bankrupt.
Designated Partner in an LLP: Deal Breakers for Appointment
- Individuals who have been marked by creditors such as private lenders as payment defaulters
- Individuals with a long history of defrauding others are ineligible to be appointed partners in an LLP.
- Individuals who are under the age of 18
- Furthermore, only people have the opportunity to become designated partners in an LLP-based firm. Private organisations, corporations, or other active companies cannot be designated partners in an LLP.
- Anyone who has not properly finalised payment settlements with any creditors in the previous five years and has not reached an agreement with them.