Consider these points before you draft your LLP Agreement!

Published On: Aug 2, 2017Last Updated: Mar 22, 20193.7 min read

What is LLP Agreement?

As per Limited Liability Partnership Act, 2008:

LLP Agreement means “any written agreement between the partners of the Limited Liability Partnership or between the Limited Liability Partnership and its partners which determines the mutual rights and duties of the partners and their rights and duties in relation to that Limited Liability Partnership.”

In plain words, LLP Agreement is a document which binds the partners of the LLP inter-alia and with the LLP. Further, it also describes the rights and duties along with same it includes clauses of operation of LLP.

Why need of LLP Agreement arises?

The LLP Agreement is mandatory as the Act requires the same to be furnished after LLP Registration, which shall be updated as and when any changes are required. Further, it is very an important document as it prescribes the rights and duties of Partners and Designated Partners. It is a document which inscribe the actions to be followed in general or specific situation such as Addition or removal of Partners and Designated Partners. Moreover, it includes the activities carried by the LLP.

The management and operations of the LLP is controlled and carried as per the clauses of the LLP Agreement. In case of any dispute or confusion, one can refer to the agreement as it is guiding instrument for any LLP and the clauses are entered after review and consideration of Partners and their assent is accorded by way of signature in the deed.

How to make the LLP Agreement Acceptable? 

  • Stamp Duty:

The LLP Agreement shall be printed on stamp paper of the concerned state where the registered office of the LLP is situated. Alternate to the stamp paper, is to pay stamp duty through banking channel, which is known as Franking. The amount of the stamp duty payable as per the State Stamp Act and the stamp duty shall be decided according to the Capital Introduced in the LLP.

  • Consent of Partners:

The consent of all the partners including designated partners of LLP is necessary for making the Agreement valid. The same is accorded by way of signature of all the partners at the end of the Agreement. In addition to same, the partners shall provide their initials on all the pages of Agreement to avoid any alteration of any clause in fraudulent manner.

  • Witness:

The signatures of at-least two witnesses are required to make the agreement valid and enforceable. In additional to signature, the name and address of the witnesses shall be hand written by the witness himself. The witness can be any person other than the parties to the agreement being a relative or any friend.

  • Date and Place of the Agreement

The date on which the LLP Agreement is entered into shall be provided along with the place of the jurisdiction where the agreement is executed.

What are the must Clauses?

An agreement is made by the combination of various clauses as mentioned in the Act, which explain and help to describe intent of the parties to the agreement. Few of the various necessary clauses are mentioned below:

  • Description of the Parties
  • Definitions to the terms used in the Agreement
  • Name and Object Clause
  • Place of Office
  • Capital Contribution and Profit/loss sharing ratio of Partners
  • Remuneration and other consideration clause
  • Accounting policy of the LLP and Management of LLP
  • Mutual Rights and Duties of Partners
  • Restriction against Competitive Business
  • Addition or Appointment of Partner
  • Resignation and Cessation of Partner
  • Winding up of the LLP
  • Arbitration Clause
  • Jurisdiction Clause

In addition to above, there are various clauses, can be added to the Agreement, which deals with specific requirement of the LLP and Partners. However, it is to be kept in mind that the clauses added do not violate any provision of the Act and Rules or Regulations made thereunder. Further, the LLP Act and Rules or Regulations made thereunder shall always prevail over the clauses defined in the LLP Agreement.

The LLP Agreement shall be registered with the MCA through LLP Form 3 within 30 days after the receipt of Certificate of Incorporation of the LLP. If any changes are to be made in future, the changes shall be intimated within 30 days to MCA.

LLP Act, 2008 under which an LLP is registered, requires the Partners to enter into an Agreement, which protects the entity as well as the partners to the agreement. Alike MOA and AOA, in case of Companies, the LLP Agreement is a fundamental document in case of LLP.

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CS Prachi Prajapati
About the Author

CS Prachi Prajapati

Company Secretary with a forte in content writing! Started as a trainee, she is now leading as a Content Writer and a Product Developer on technical hand of The author finds her prospect to carve out a valuable position in Legal and Secretarial field.

One Comment

  1. Vibha 20/08/2020 at 7:05 am - Reply

    Whether Full name of Witness includes Father’s name?

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