Drafting LLP Agreement

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Introduction
Process
Advantages / Features
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INTRODUCTION

A Limited Liability Partnership is a hybrid combination of both a company and a partnership. Such a business model strives to function on the merits of both type of organisations. An LLP is governed by the Limited Liability Partnership Act, 2008. The Limited Liability Partnership model is an alternative business arrangement that offers the benefits of a company’s limited liability but gives its participants the freedom to coordinate their internal management on the basis of a mutually arrived agreement, as in the case of a partnership. This model is very useful for small and medium-sized companies in general.

A Limited Liability Partnership Agreement is a document which determines the mutual rights and duties of the partners inter se and also establishes a relationship between the LLP and the partners. The agreement can be between partners or between the LLP and the partners.

PROCESS

A Limited Liability Partnership Agreement entails the following:

Name of the LLP: The Agreement must begin with the name of the entity. As per the Act of 2008, this name should end with ‘LLP’ and must be reserved with the registrar by application through the MCA website.
Identification of Parties: It should identify all the partners to the LLP and also the designated partner(s). Such identification must include name, address, DPIN, DSC and other relevant information.
Place of Business and Registered office address: as per the provisions of the 2008 act , all LLPs to have a registered office address for all correspondence from the central government.
Business Activity: It should identify the purpose, objective and the activity for which the entity has been established.
Provisions for governance: the agreement should specify the provisions for addition or removal of partners, procedure for amendments, methods of accounting and audit, Partners’ rights and duties etc.
Capital contribution: The LLP Agreement should specifically clarify the contribution of each partner along with the ratio for profit sharing etc.
Provisions for conflict resolution: It should have a clause for arbitration if there is any dispute between the partners, or any other method of dispute settlement.

As per Rule 21 of the Limited Liability Rules, 2009, it is mandatory for the LLP to file the Limited Liability Partnership Agreement, within thirty days of incorporation, with the Registrar via Form 3 (Information with regard to Limited Liability Partnership Agreement and changes, if any, made therein).