A Limited Liability Partnership, or LLP, is a type of corporate business structure that combines the core features of a partnership firm with the advantages of a limited company. Unlike a Sole Proprietorship business, many people can collaborate as partners to invest in and operate an LLP. In contrast to a Partnership firm, which does not have a separate legal identity from its partners, an LLP is incorporated as a separate legal entity and is liable to fulfill all its obligations in its name instead of the name of its partners.
The liability of the partners in an LLP is distributed among them in the ratio of their capital contribution or as otherwise mentioned in the Limited Liability Partnership Agreement. Akin to a Limited Company, the individual liabilities of partners in an LLP are also limited. Moreover, the partners are protected against joint liability, that is the actions of one partner does not make the other partners liable as well.
The initial partners of the LLP are those who sign the LLP Agreement word format or llp deed format in word. According to the terms of the LLP Agreement, anyone who is eligible, can join as the partner of the LLP. It is made clear that only an individual or a corporation may be a partner in a limited liability partnership in accordance with section 5 of the LLP Act, 2008.
For the purposes of the LLP Act of 2008, a HUF (Hindu Undivided Family) cannot be regarded as a corporate body. As a result, neither a HUF nor its Karta can be named a partner in an LLP. The Limited Liability Partnership agreement defines the relation that shall exist among the partners, and between the partners and the LLP.
As a legal entity separate from its partners, an LLP is responsible for fulfilling its duties and liabilities, in its own name instead of the name of its partners. The liabilities of the LLP must be covered by assets of the LLP only. When a partner acts on behalf of the LLP without proper authorization, the LLP shall not be held accountable for his actions.
LLP is responsible for any partner’s misconduct committed during the course of business or while acting under the LLP’s authority. A partner is not personally liable towards the LLP. The partner is himself responsible for his own improper action or omission, nevertheless.
A partner’s obligation to contribute capital must follow the terms agreed by all partners and mentioned in the LLP Agreement word format or limited liability partnership deed. Apart from capital contribution, the contribution of the partners may also be with regards to movable or immovable property, tangible or intangible assets, and contracts of services rendered or to be rendered.
The amount and type of each partner’s contribution must be stated in the LLP’s financial statements as well. A Chartered Accountant, Cost Accountant, or Approved Valuer must estimate the monetary value of the non-financial contribution for the purpose. A creditor of an LLP who offers credit based on a partner’s commitment to pay it off, may hold the partner accountable for the payment of that credit.
LLP is obliged to maintain books of accounts on an accrual basis or a cash basis, following the double-entry system of accounting. The financial situation, specifics of money received and spent, the list of assets and liabilities, the cost of products acquired, inventories, work-in-progress, finished goods, and the cost of goods sold should all be disclosed in the books of accounts.
The designated partner shall be able to verify from the books of accounts that the Statement of Account and Solvency is genuine. Such a Statement of Account and Solvency must be filed in Form 8 to the Registrar of Companies by the LLP, not later than October 30th, of the immediately succeeding financial year. The LLP’s accounts are also required to be annually audited.
Whether embarking on LLP incorporation or managing existing partnerships, adhering to the guidelines set forth in the LLP Agreement Format in word or llp deed format in word is essential for fostering successful business endeavors and safeguarding the interests of all stakeholders involved. The above blog would have aided you in gaining better insights into LLP Agreement format in word.
A Limited Liability Partnership (LLP) Agreement or limited liability partnership deed is a legally binding document that outlines the rights, responsibilities, and obligations of partners within a Limited Liability Partnership (LLP). It serves as a foundational framework for governing the operations and relationships within the LLP.
Drafting a precise LLP Agreement format in word is essential as it clarifies the terms of partnership, including capital contributions, profit-sharing ratios, voting rights, and procedures for partner additions or expulsions. It provides a comprehensive roadmap for managing the LLP effectively and resolving disputes amicably.
A draft LLP Agreement sample or deed format in word should include details such as the legal name and business activities of the LLP, complete information of partners, their rights and obligations, capital contributions, profit-sharing ratios, voting rights, and procedures for partner additions or expulsions. Additionally, it should address accounting practices, audits, and any other pertinent clauses relevant to the partnership.
The Limited Liability Partnership Agreement safeguards partners’ interests by clearly defining their rights, responsibilities, and liabilities within the partnership. It establishes a framework for resolving disputes, ensuring transparency, and protecting partners from potential misunderstandings or conflicts.
Yes, changes can be made to the Limited Liability Partnership Agreement format after it’s been finalized, but they must be documented in writing and agreed upon by all partners. Any amendments to the agreement should be made in accordance with the procedures outlined in the original LLP Agreement or limited liability partnership deed itself to maintain its validity and enforceability.
Good guide on drafting an LLP Agreement accurately for smooth incorporation.