Perhaps the most attractive aspect of limited liability partnerships is that they are less liable than a corporation. They ensure the personal assets of their partners get safeguarded if the limited liability partnership enters bankruptcy or an individual lawsuit is taken out against it.

Separate Legal Entity:

The limited liability partnership is exactly the opposite of its partners. It is a separate entity and, thus, can hold property, enter into contracts, and sue and be sued.

Perpetual Succession:

That particular feature now has to say that, in the effect of a partnership, the leaving of one partner or the addition of new partners shall in no case affect the existence of the partnership.

Lower tax, with the consequent complete tax efficiency, is one of the other benefits of the LLP. Tremendous financial benefits for the partners come as the order of the day.

Transferability of Ownership:

When compared to other forms of partnership, the transfer of ownership in an LLP or addition or exit of partners from an LLP is an easy-going process, thus giving LLPs an edge over other forms of business that continuously change hands.

Unique Identification Number:

The Unique Identification Number should, in the proposal, clearly state that prior to such appointment, the nominated partner should have obtained such number.

Minimum of Two Designated Partners:

For designation, there should be two partners as a minimum for an LLP; others can be appointed and included.

Residence Requirement:

At least one of the designated partners should be a citizen of India.

Written consent should be given by the designated partner for joining the LLP.

To qualify for appointment as a designated partner, an individual needs to have been at least 18 years of age.

The proposed designated partner must have his digital signature. Its authenticity is obtained from the proposed digital signature through a certifying authority. This DSC is required for submitting documents electronically.

Issue Director Identification Number (DIN):

After obtaining the DSC, the proposed partner must apply for a DIN which acts as an identifier of the designated partner.

Hold a board meeting:

The current partners of the LLP must call a meeting to make the necessary resolutions to approve the appointment of a new Designated Partner. Decisions made and entered into the minutes of the meeting, signed by all the existing partners.

Supplemental Deed of Partnership Draft Required Formulation:

The new designated partner’s details should be incorporated in the partnership deed. This deed must be accompanied by a letter of consent from the proposed partner.

File forms with the registrar of companies:

The LLP will file form 4 and form 3 with the Ministry of Corporate affairs within 30 days from the date of appointment. Form 4 is used for the appointment of the designated partner. Form 3 details the rights and liabilities of partners.

Verification and Approval:

The Forms submitted will be verified by the MCA to see whether all was rightly under the LLP Act. When all is fine, approval regarding appointment will be given, and the new designated partner will be officially approved.

Confirmation of Appointment:

Upon official confirmation from the MCA, the name of the new designated partner will be registered in the official records of the LLP, and he can start off with his duties.

Uncategorized

Understanding Limited Liability Partnerships (LLPs) and the Appointment of Designated Partners

Nikita P

December 11, 2024

4 min read

A limited liability partnership or LLP combines features of a partnership and the protection against personal liability of a corporation.Such a model would, therefore, suggest compatibility toward small and medium enterprises that wish to retain flexibility in their operations while accepting adequate protection against litigation.

Advantages of LLP Registration

Limited Liability: Perhaps the most attractive aspect of limited liability partnerships is that they are less liable than a corporation. They ensure the personal assets of their partners get safeguarded if the limited liability partnership enters bankruptcy or an individual lawsuit is taken out against it.

Separate Legal Entity: The limited liability partnership is exactly the opposite of its partners. It is a separate entity and, thus, can hold property, enter into contracts, and sue and be sued.

Perpetual Succession: That particular feature now has to say that, in the effect of a partnership, the leaving of one partner or the addition of new partners shall in no case affect the existence of the partnership.

Management Flexibility: There are a few restrictions for managing an LLP. There is no board of directors. This provides flexibility in the overall management of an LLP.

Tax Benefits: Lower tax, with the consequent complete tax efficiency, is one of the other benefits of the LLP. Tremendous financial benefits for the partners come as the order of the day.

Transferability of Ownership: When compared to other forms of partnership, the transfer of ownership in an LLP or addition or exit of partners from an LLP is an easy-going process, thus giving LLPs an edge over other forms of business that continuously change hands.

Eligibility Criteria for Designated Partners

There are certain criteria for being appointed as a designated partner in LLP.

Only individuals can be designated partners. No other business or LLP shall be appointed like a designated partner.

Unique Identification Number: The Unique Identification Number should, in the proposal, clearly state that prior to such appointment, the nominated partner should have obtained such number.

Minimum of Two Designated Partners: For designation, there should be two partners as a minimum for an LLP; others can be appointed and included.

Residence Requirement: At least one of the designated partners should be a citizen of India.

Consent: Written consent should be given by the designated partner for joining the LLP.

Age Specifications: To qualify for appointment as a designated partner, an individual needs to have been at least 18 years of age.

Appointment Procedure of Designated Partner- LLP

Appointing a designated partner in an LLP is covered under below mentioned steps:

Obtain DSC: The proposed designated partner must have his digital signature. Its authenticity is obtained from the proposed digital signature through a certifying authority. This DSC is required for submitting documents electronically.
Issue Director Identification Number (DIN): After obtaining the DSC, the proposed partner must apply for a DIN which acts as an identifier of the designated partner.
Hold a board meeting: The current partners of the LLP must call a meeting to make the necessary resolutions to approve the appointment of a new Designated Partner. Decisions made and entered into the minutes of the meeting, signed by all the existing partners.
Supplemental Deed of Partnership Draft Required Formulation: The new designated partner’s details should be incorporated in the partnership deed. This deed must be accompanied by a letter of consent from the proposed partner.
File forms with the registrar of companies: The LLP will file form 4 and form 3 with the Ministry of Corporate affairs within 30 days from the date of appointment. Form 4 is used for the appointment of the designated partner. Form 3 details the rights and liabilities of partners.
Verification and Approval: The Forms submitted will be verified by the MCA to see whether all was rightly under the LLP Act. When all is fine, approval regarding appointment will be given, and the new designated partner will be officially approved.
Confirmation of Appointment: Upon official confirmation from the MCA, the name of the new designated partner will be registered in the official records of the LLP, and he can start off with his duties.

Ending Note

LLP registration brings great benefits in the areas of limited liability, management flexibility, and tax benefits. The steps to be followed in the appointment of designated partners include obtaining a Digital signature and Induction into the Industry against a fine. Once they follow through with the above mentioned processes, the organisations can be able to name their stated partners and thus benefit from LLP structure limiting the liability and flexibility to operate. LLPs are a model of doing business that strikes an ideal equilibrium between risk management and an entrepreneurial reward.

Read blog: LLP Registration In India