The Limited Liability Partnership (LLP) Act was introduced in 2008 to provide a more flexible business structure for small and medium-sized enterprises (SMEs). The LLP agreement is a crucial document that establishes the rights and obligations of partners in the LLP. In this article, we will explore the key provisions of an LLP agreement as per the LLP Act 2008.
Firstly, let`s understand the basics of an LLP. An LLP is a hybrid business structure that combines the advantages of a partnership and a company. It offers the benefits of limited liability to its partners, meaning their personal assets are protected in case of any liability arising from the business. At the same time, it provides the flexibility and tax benefits of a partnership.
An LLP agreement is a legally binding document that outlines the terms and conditions of the partnership. It is created at the time of registration of LLP and governs the relationship between partners, their rights, duties, and liabilities. The LLP Act 2008 requires an LLP agreement to be in writing and signed by all partners.
Here are some important provisions that should be included in an LLP agreement as per the LLP Act 2008:
1. Name and registered office of the LLP: The agreement should specify the name of LLP and its registered office address.
2. Capital contribution: Each partner`s contribution to the capital of the LLP should be clearly defined in the agreement.
3. Profit sharing: The LLP agreement should specify how profits and losses will be shared among partners. This can be based on their capital contribution, work done, or any other agreed terms.
4. Management and decision-making: The agreement should outline the roles and responsibilities of partners in managing the LLP. It should also specify the decision-making process and how disputes will be resolved.
5. Retirement or expulsion of partners: The agreement should include provisions for the retirement or expulsion of partners. This can be due to retirement, death, incapacity, or breach of agreement terms.
6. Dissolution: The agreement should specify the circumstances under which the LLP will be dissolved, such as completion of the project, mutual agreement, or insolvency.
In conclusion, an LLP agreement is a crucial document that outlines the terms and conditions of the partnership and protects the interests of partners. It is recommended to consult a legal professional experienced in LLP laws to draft an agreement that meets the specific needs of the business. By following the provisions as per the LLP Act 2008, the LLP can run smoothly and achieve its goals.