The distinction that you need to know about partners and designated partners in the LLP
The LLP structure is profoundly influenced by the components of general partnership under the India partnership act, 1932. Here, the normal partnership firm offers various types of partners based on their participation in the regular operation of the business. Nonetheless, as the LLP gets the components of a corporate entity from a private limited company, the separation to hold an individual responsible is provided.
In the case of LLP formation in India during the continuous existence, the desideratum of the minimum number of designated partners is offered by the LLP act, 2008. The act mandates that the LLP should be incorporated with a minimum of two designated partners being individuals, where at least one should be a resident of India. To add one other requirement to that, during the LLP online incorporation, the same should also be fulfilled during the business's persistency.
What is the distinction between partners of the LLP and designated partners of the LLP?
Responsibility of the designated partners and the partners of the LLP.
First, the variance betwixt both is the accountability of both types of partners. Where the liabilities and rights in the LLP case are mentioned and regulated by the LLP agreement, the LLP act, 2008, states higher responsibility of the designated partners of LLP.
The act orders that unless expressly offered by the LLP agreement, the liabilities and rights of both types of partners will be similar in the following manner;
The partner's liability is limited solely to the LLP agreement and acts and omissions by the partner himself/herself. The designated partners will be responsible for the liabilities mentioned by the LLP agreement and all the penalties enforced on the LLP partners for infringement of any provisions applicable and to be abided by the LLP.
An explication can be provided that a designated partner of an LLP would be responsible for the compliance requirements to be met by the LLP, including the submission of any documents, statement or return with authority as and where applicable and needed. Non-compliance of which such as non-compliance or infringement of provisions, the LLP's designated partners can be liable for penalties and punishment under the LLP act (or other such acts) severally or personally.
Also, LLP's designated partners are more accountable for legal and regulatory compliances apart from regular operations and activities of the LLP after, and thus responsibility and liabilities increase accordingly.
The LLP act, 2008, states provisions where requirements concerning the appointment of partners and designated partners are given. As stated above, the act offers that the LLP be registered and incorporated by appointment of a minimum of two designated partners (of which one has to be an Indian resident). Nonetheless, there is no provision mentioned in the act for minimum numbers of partners to be appointed in the LLP. That's why the LLP formation can be initiated by a minimum of two personnel as designated partners.
Modus operandi for an appointment.
The manner of appointment of both partners and designated partners are pretty similar. The appointment can be made by following the process that has been laid down under the LLP agreement and LLP Act, 2008. The process of appointment of partners and designated partners includes the change in the LLP agreement and submission of e-forms to MCA.
Nonetheless, an additional requirement of DIN is mentioned for the appointment of an individual as a designated partner in the LLP. DIN is a number assigned by MCA to individuals on an application made for allocation thereof. While the appointment of a person as designated partner, the DIN should be entered in the application submitted with the MCA.
- The decision to add a person as a designated partner in the entity will be taken at the time of LLP registration in India or on the inclusion of an individual in the LLP.
- Distinctions mentioned above can be helpful to the LLP's partners and the individual, himself/herself, to conclude whether on the designation of proposed candidature.
- Change in the designated partners frequently is requisite while scaling up the business.
Whether the change of designation is allowed or not after LLP registration?
It is possible after the online LLP formulation and incorporation. The designated partner intends to be a partner or a partner to be appointed as a designated partner of the LLP. The change in the LLP agreement has to be made by entering into a supplementary deed with apt clauses to the LLP agreement.
Afterward, an application can be made to the registrar for a change of partner(s) designation by filing necessary documents. Where the proposed change of designation is a partner to designated partners, the application has to be made for allocation of DIN in e-form DIR-3.
The distinction betwixt partner and designated partner are not profound. Nonetheless, slight differences were described above, which has to be considered while incorporating a person the LLP.