Company & LLP

LLP Agreement

File this with the Registrar within thirty days of incorporation. If you do not, the default provisions in Schedule I to the Limited Liability Partnership Act, 2008 govern the LLP instead — equal profit sharing regardless of contribution, unanimity for every decision, and no right to expel a partner. Those defaults are almost never what the partners intended.

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Limited Liability Partnership Agreement

[LLP NAME] LLP

THIS LIMITED LIABILITY PARTNERSHIP AGREEMENT is made at [PLACE] on [DATE]

AMONG:

(1)[PARTNER 1], [son / daughter of ______, aged ______ years], residing at [ADDRESS], holding PAN [PAN] and DPIN [DPIN];

(2)[PARTNER 2], [particulars, PAN and DPIN]; and

(3)[PARTNER 3], [particulars, PAN and DPIN],

(each a "Partner" and together the "Partners"), and [LLP NAME] LLP, a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 bearing LLPIN [LLPIN], having its registered office at [ADDRESS] (the "LLP").

Recitals

A.The LLP was incorporated on [DATE] under the Limited Liability Partnership Act, 2008 (the "Act") with the Partners as its partners.

B.The Partners wish to record the mutual rights and duties of the Partners and of the Partners and the LLP, in substitution for the provisions of Schedule I to the Act.

NOW THEREFORE the Partners agree as follows:

1. Name, Business and Office

1.1The LLP shall carry on business under the name and style of [LLP NAME] LLP, or such other name as the Partners may agree and the Registrar may approve.

1.2The business of the LLP is [DESCRIBE THE BUSINESS PRECISELY], and such other business as the Partners may unanimously agree, being any lawful business, trade, profession, service or occupation.

1.3The registered office of the LLP is at [ADDRESS]. It may be changed by a decision of the Partners and on filing the prescribed form with the Registrar. The LLP may carry on business at such other places as the Partners decide.

1.4The LLP is a body corporate with perpetual succession, distinct from its Partners. A change in the Partners shall not affect the existence, rights or liabilities of the LLP.

1.5The financial year of the LLP shall end on [31 March] in each year.

2. Contribution

2.1The Partners shall contribute to the LLP the amounts set out in Schedule 1, in cash or in kind as stated, by the dates stated. The contribution of each Partner shall be recorded in the books of account of the LLP and disclosed in its accounts.

2.2A contribution in kind shall be valued by a practising chartered accountant, cost accountant or approved valuer, and the valuation report shall be retained with the books of account.

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Preview of the first page. Highlighted fields are the ones you fill in — they appear the same way in Word. Scroll the preview to read on; the full document runs to 10 pages.

Notes for use

These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.

File it within thirty days, or Schedule I governs

An LLP agreement must be filed with the Registrar in the prescribed form within thirty days of incorporation. Where no agreement is filed, or on any matter on which the agreement is silent, Schedule I to the Act applies by default. Those defaults share profits equally regardless of contribution, require unanimity for every decision, entitle every partner to take part in management, and confer no power to expel a partner on any ground. An LLP with three partners contributing in the ratio 70:20:10 and no filed agreement shares profits one third each.

Contribution is not share capital

There is no minimum contribution, contribution may be in cash or in kind, and contribution ratio need not match profit-sharing ratio. Because the two can differ, state both separately in Schedule 1 rather than assuming one follows the other. Contribution in kind must be valued by a qualified person and the valuation retained.

Partner remuneration must be authorised in advance

Remuneration to working partners is deductible in computing the income of the LLP only if it is authorised by, and is in accordance with, the terms of the LLP agreement, and only for a period falling after the date of that agreement. A resolution passed at the year end authorising remuneration for the year just ended does not work. Where remuneration is being introduced or changed, execute and file a supplementary agreement before the period to which it relates begins, and confirm the current deduction limits and the permissible rate of interest on contribution with your tax adviser.

Designated partners carry the compliance liability

At least two designated partners are required, both individuals, at least one resident in India. They are personally liable for the penalties imposed for the LLP’s failure to file. In a small LLP the designated partners are usually the working partners, who are also the people least likely to track filing deadlines. Put the annual filings in a calendar and treat them as the designated partners’ personal exposure, because that is what they are.

Filing penalties compound daily

Late filing of LLP forms attracts an additional fee that accrues per day of delay and is not subject to the same ceilings that apply to companies. An LLP that has not filed for several years can face a very large accumulated fee. If filings are behind, deal with them promptly rather than waiting for a transaction to force the issue.

Expulsion must be conferred expressly

The Act gives no power to expel a partner. If the agreement does not confer one, a partner who is defrauding the LLP cannot be removed except by winding it up or by agreement. Clause 9.4 confers the power, defines the grounds narrowly, and requires notice and an opportunity to respond, which is what makes it defensible.

Settlement on cessation is where LLPs actually fall out

Clause 9.5 fixes what a departing partner receives: contribution, share of accumulated profits, current account balance, less what is owed. The two questions to settle explicitly are whether the departing partner is paid anything for goodwill, and over what period the payment is made. Silence on either produces a dispute at exactly the moment the relationship has broken down.

Transfer of profit share is not admission

A partner may assign the economic right to profits, but the assignee gets no management rights, no information rights, and does not become a partner. Partners sometimes assume assigning a profit share transfers the partnership interest. It does not, and admission of a new partner requires consent and a filing.

Liability is limited but not absolute

A partner is not liable for another partner’s wrongful acts, but remains personally liable for its own, and the shield does not protect a partner who acts with intent to defraud a creditor. The LLP form limits vicarious liability; it does not convert negligence into immunity.

No non-compete after cessation

Clause 10.3 states the position. Section 27 of the Indian Contract Act, 1872 voids restraints of trade, and a post-cessation non-compete on a former partner will not be enforced except within the narrow goodwill exception. The duty not to compete during the partnership, in Clause 7.1(d), is enforceable and is the clause that matters.

Audit thresholds and annual filings

Audit is mandatory only above prescribed turnover and contribution thresholds, but the statement of account and solvency and the annual return must be filed every year regardless. An LLP below the audit threshold still has annual filing obligations, which is the point most often missed by small LLPs that assume being unaudited means being unregulated.

Stamp duty

Duty on an LLP agreement is State-specific and in several States is calculated by reference to the contribution. Confirm the article and the rate in the State of execution before printing, and note the place of execution correctly. A supplementary agreement is separately stampable.

Current as of

Reflects Indian law current as of {{DATE OF USE}}. Filing forms and timelines, audit thresholds, additional fee structures, and the tax limits on partner remuneration and interest on contribution all change — have this agreement reviewed by a company secretary and a tax adviser before execution and before any supplementary agreement.

This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, company secretary, or chartered accountant as relevant) before you rely on it.