LLP Agreement For Limited Liability Partnership Incorporation In India

November 14, 2019

5 min read

In our latest insights, we shed some light on what an LLP agreement, using an LLP agreement template, and the most important provisions of the agreement.


Kamit Jain

Consultant, Gurgaon

LLP Agreement For Limited Liability Partnership Incorporation In India


Business incorporation in India is not a single legal procedure but requires a series of formalities to be fulfiled. One of the business structures preferred by a majority of new businesses in India is a Limited Liability Partnership (LLP), which requires business registration with the MCA, obtaining DPIN for the partners, name reservation, and the Limited Liability Partnership (LLP) Agreement. In our latest insights, we’ll shed some light on what an LLP agreement, using an LLP agreement template, and the most important provisions of the agreement. 

Meaning Of LLP Agreement Under LLP Act

As per the Limited Liability Partnership LLP Act, an LLP agreement in India lays down the terms and conditions that govern the relationship between the partners and their relationship with the business. An LLP agreement is a well-defined agreement that lists the details of the partners, their rights and responsibilities, and the provisions that can be taken in case of violation by any of the partners.

Under the LLP Act, it is mandatory for a Limited Liability Partnership to file its LLP Agreement with the MCA within 30 days of incorporation. In case of non-fulfilment of this requirement by the LLP, a daily fine of INR 100 is levied on the business for each day the business defaults in submitting the agreement. 

For a solid foundation of a business, it is important to have a concrete, watertight LLP agreement that defines the terms, conditions, rights and responsibilities applicable of the partners of the LLP. SeekWiser suggests consulting a good business consultant in India for discussing and understanding the provisions to be included in the LLP agreement.

ALSO READ: Complete Process Of LLP Registration In India

Using LLP Template Agreements

There are thousands of template LLP agreements available online, which provide only basic protection and little to know legal security to the partners of the LLP. Usually, these agreements contain only some of the most important legal provisions and do not cover the legal requirements of the business and its partners. Using a customised LLP agreement as per the nature of the business and requirements of the partners can safeguard them from any unwanted legal threats or legal disputes in the future. 

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Drafting of LLP Agreement

To make it simpler for business owners, SeekWiser has compiled a list of the most important provisions to be included in the LLP agreement inclusive of the other provisions that may be required on the basis of the nature, scale and industry of the LLP. 

Details Of The LLP

The first and foremost clause of an LLP Agreement is the details of the business, stating the name, address, nature and duration (if any) of the business.

Details Of The Partners And Designated Partners

The Limited Liability Partnership LLP Agreement must state the details of every partner as well as the designated partners, including details about their name, address, designation, etc.

Admission Of New Partners

It is important to define the procedure to be followed in the case a new partner is added to the LLP. Since there is no limit to the number of partners that can be in an LLP, it is important to keep the procedure simple so that a new partner can be added without affecting the relationship of other partners.

Removal Of Existing Partners

The Limited Liability Partnership LLP Agreement must lay down the legal and internal formalities to be performed in case of a partner getting removed from the business. The provision must also include the grounds on which a partner may be removed from the LLP, such as violation of the LLP agreement, participating in any illegal activities, etc.

Profit And Loss Sharing

This provision enumerates the contribution made by each partner in the LLP agreement in terms of capital, property, IPRs, etc. and the ratio in which the profits and losses are to be shared between them. The clause also lays down the interest that will be given to the partners on the capital they put in the LLP.

Remuneration And Salary

The LLP agreement must mention the remuneration, salary, bonus, incentives, etc. given to each partner in a month, quarter or year. This provision includes the complete breakdown of the remuneration received by a partner apart from the interest of capital.

Duties And Responsibilities Of Partners

The LLP Agreement must state the duties, responsibilities, roles, and liabilities of each partner in the business. The provision must lay down in detail, the departments, activities, and roles to be handled by the partner along with the partner’s contribution in terms of intellectual property, appointment as manager, etc.

Dispute Resolution

This provision lays down the method in which any disputes between the partners, or between the partners and the LLP would be resolved. The method of dispute resolution may be opting for litigation or Alternative Dispute Resolution such as Arbitration.

Understanding the LLP’s requirements is critical in drafting an errorfree and accurate LLP agreement. Seeking advice from a good legal consultant in India can enable the business owners in having an LLP agreement as per their requirements and wishes. 

The legalities involving an LLP agreement does not end with its drafting, but it must be filed with the MCA within the time stipulated to avoid heavy penalties right at the incorporation stage of the business. 

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