What Inaugurates In LLP Agreement? Important Points To Remember


Limited Liability Partnership (LLP) is an alternative form of business organization. It not only provides the benefits of limited liability but also allows its members the flexibility of organizing their internal affairs as a partnership based on a mutually arrived agreement. Liability of the partners is not as limited as that of shareholder in a company. LLP Agreements mean a written agreement between the partners of the limited liability partnership (LLP) or between the LLP and its partners which establish the rights and duties of the partners toward each other as well toward the LLP.


Statement of Background section:

  • Date of submission of form 2
  • The RoC in which the firm will be registered with.
  • The principal activity of the LLP: A brief note on the purpose of the business and laws that will abide by.
Name of the LLP

The name of the LLP shall end with LLP or Limited Liability Partnership as per the provisions of the LLP Act.

 

Status Details section

Status of LLP and LLP Assets’ section: This would state that LLP shall be a legal entity separate and distinct from its Partners. The LLP shall own all its assets in its own name.

 

Introductory provisions

It includes the definition of terms used in the LLP agreement, the name of the LLP and provision of future name changes, initial partners, new partners admission, business activities and their scope, power of LLP, duration, management, accounting, auditing, etc.

 

LLP’s Annual Accounting sections This section will look something like this
  • LLP should prepare profit and loss account and balance sheet including statement of accounts and solvency in accordance with the provisions of Income tax Act, 1961
  • Auditing,
  • Partners’ Contributions to the LLP in Exchange for Their Partnership Rights
  • In deciding income, the LLP shall use the accrual basis or cash basis as decided by majority of partners
  • LLP’s Accounting Method: As per Indian Accounting Standards and Income Tax Act, 1961 unless otherwise required under the LLP Act.
  • The LLP’s annual accounting period for financial and tax purposes shall be the financial year as defined in the LLP Act.
Partner's contribution and method of contribution

It portrays the contribution ratio of partners in terms of capital, interest on contribution, profit sharing ratio as well as the time period after which the capital can be withdrawn by any of the partners. It is important for maintaining the good cordial relation between partners.

 

LLP record keeping and bank arrangement

It includes the recording, maintenance, and storage of LLP books and other related documents.

 

Capital and current account

It includes particulars that will be credited and debited in each account.

 

LLP Partner Dissociation and purchase of shares

This section will look something like this

  • Events of Dissociation—In General (rights after dissociation will also be listed down)
  • Dissociation upon Resignation
  • Dissociation upon death
  • Dissociation upon disability
  • Dissociation upon partner insolvency
  • Dissociation upon expulsion
  • Redemption and Cross Purchases of Partnership Rights post dissociation
  • Option of LLP to Redeem and Other Partner to Cross-purchase the Partnership Rights of Dissociated Partner
  • Buy out Terms
Sales, transfer of partnership rights

It provides procedural information about the selling, transferring of partnership right to existing partner and a new partner. Partners’ meetings and voting – It covers the mode, time period of the meeting, the method of the decision-making process and the voting rights of the partners concerned.

 

Partner’s rights to records

Each partner has the right to scrutinize the records and documents of LLP for avoiding misappropriation and embezzlement. Rights of each partner to inspect records of LLP and copies of the same.

 

Management and fiduciary duty

It takes into account the responsibility of the management of a company and the appointment of manager as well as the person liable for fiduciary duty i.e. taking care of legal matters as well as funds and assets of the company. Arbitration and general provisions: In the case of disagreement between parties, the parties may involve the third party known as an arbitrator who listens to both the parties and takes a decision, which is to abide by both the parties concerned.

 

Signature and Dates

In witness of their acceptance of the terms and conditions of this LLP agreement, the parties, by themselves have duly signed this Agreement the day, month and year. For any Legal support, we will be happy to help you. Contact BDS Legal Services now.

 

About BDS Legal Services:

BDS Legal Services is a leading national law firm in India comprising over numerous professionals, with offices in Mumbai (Headquarter) and Pune. BDS Legal Services was set up in 2012 and has since established an excellent reputation for its integrity and value based proactive, pragmatic and innovative legal advice and its ability to help clients effectively traverse the complicated legal and regulatory regime in India. The mission of the Firm is to provide outstanding legal solutions in the chosen practice areas with a strong emphasis on ethics. Clients benefit from the expertise and experience as a large firm while still enjoying the privilege of personal attention and responsiveness of a small firm. Our Practice areas are – IPR, Secretarial, Legal, Company Registration, Annual Filings, Returns and Tax

 

Get in touch for free consultation on info@bdslegalserv.com or call 022 50677213 / 022 50677219 / 022 50677212.

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