LLP is an acronym for Limited Liability Partnership, an emerging form of business organization. It incorporates partnership and physical corporate features, such as a low compliance cost, while allowing for a common partnership in terms of internal structure. At least two partners in the LLP registration in Kerala should act as designated partners, the person should be and one of them should be a resident of India.
Drafting of LLP Agreement
When drafting an LLP agreement, the individual should cover all the details about the roles, responsibilities, rights, duties and powers of the partners and the LLP. At the same time, it also shows the scope and extent of LLP’s operations.
Therefore, it plays a crucial role in the uninterrupted operation of the LLP, as it refers to all the responsibilities of management, operations and administration.
- The first step in preparing an LLP agreement is to draft the agreement.
- Thereafter, the draft agreement should be print on stamp paper of the required value. It must be noted that the amount of capital allocated by each partner and the state in which the registration takes place are two factors on which the value of the judicial stamp paper depends.
- At the bottom of the contract, the partners must sign the contract in the space provided.
- Along with the signatures of the partners, the two witnesses must also sign the contract in the space provided.
- A copy of the deed should be give to all partners.
If there is a change in the terms of the partnership, then a resolution needs to be pass that allows an amendment to the contract. Further, the form, along with the require documents such as the original agreement and the amend agreement, needs to be submit to the Registrar within days of such amendment.
Important facts about the LLP registration
The members of the LLP act as its agents and are responsible only for the amount they have contributed to the LLP registration in Kerala especially their capital contributions and unprofitable profits. This is a significant advantage in traditional partnerships where partners generally have unlimited liability.
However, there are some circumstances in which a member’s personal liability may be extended.
Negligence – If a member shows negligence and results in harm to a third party, the third party may attempt to take action against that individual member as well as the LLP. However, any such action violates the principle of limited liability and courts are generally reluctant to find individual members responsible for their own negligence.
LLP registration in Kerala
False / Fraudulent Trade – False and fraudulent trade provisions apply to LLPs in the same way as limited companies. If the members of the LLP (a) allow the LLP registration in Trivandrum to continue trading after being inform (or should know) that there is no reasonable possibility of avoiding bankruptcy; or (b) allow creditors to continue trading from the point of view of fraud, they may be personally liable. Both the degree of each member and the degree of control in the business will be relevant.
The potential for fines is unlimit and anyone can be order to contribute as the court deems fit.
Insolvency Claw back – Allows Claw back of any “withdrawal” (including drawing, loan repayment and asset distribution) by a member during the two years prior to becoming insolvent by the LLP. Again, the court has discretion in this area.
Personal Guarantee – Anyone who lends to an LLP may still need a member’s personal guarantee, as they often do with the company’s directors / shareholders. Members should check the contract provisions of their members as to whether the LLP offers any compensation to its members for such a guarantee and the responsibility will be shared with other members.
Flexibility in organization
LLPs have organizational flexibility of participation and the day-to-day running provisions of LLPs are usually include in a written LLP agreement. The LLP agreement will usually deal with:
- Profit and loss.
- Property ownership.
- Meetings / decision making.
- Admission of new members.
- Retirement / expulsion of members.
- Compensation and insurance.
- Prohibition agreement.
- Any written LLP agreement is a private document that is confidential to members.
The LLP must have two “appointed” members. The LLP of assigned individuals has unique obligations and capacities that intently mirror the obligations that would regularly be performed by a chief or secretary of an organization.
- Appointment of Auditor (where appropriate).
- By signing the LLP’s annual accounts and delivering to the Companies House.
- Preparation, signing and distribution of annual return of LLP to Company House.
- Notify the House of organizations of any change in LLP participation, name or enlisted office charge address.
- Acting on behalf of the LLP if it is injure or dissolve.
- If the number of designated members falls below two, each member of the LLP is automatically consider a designated member.
Extent of limitation of LLP in India
Each accomplice of the LLP registration in Kerala is a specialist of the LLP with the end goal of its business however it isn’t the specialist of different accomplices.
- The LLP’s liability is solely its liability and the LLP’s liability is to get out of the LLP’s assets.
- The LLP is not bound by anything done by the partner in dealing with another person, if the partner has no right to act on behalf of the LLP and the person knows that the partner has no right; or did not know or did not consider him a partner of the LLP.
- It provides, further, that the liability of the LLP, arising from the contract or otherwise, shall be the sole liability of the LLP.
- The credit recipient LLP is responsible for any financial gain receive to or from the credit receive.
- If any of the LLP or any of its partners has acted with the intent to defraud the creditors of the LLP or any other person or for any fraudulent purpose, the liability of the LLP and its affiliates is unlimited.
- However, where the fraudulent act is commit by a partner, the LLP is not liable if it is establish by the LLP that the act was without the knowledge or authority of the llp.