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This article is written by Ishita Goyal pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from Lawsikho.

Meaning of limited liability partnership (LLP) 

The full form of LLP is a limited liability partnership. It can be defined as a corporate business vehicle which in a way helps in giving the benefits of limited liability of an organisation to its members and also provides assistance to handle their internal management on the basis of a mutually arrived agreement which is in the case of a partnership firm. Partners have lower liabilities to any debt which can come up in the upcoming years or so in managing the companies’ businesses. Now here the structure consists of both ‘a corporate structure’ as well as ‘a partnership firm structure’ and thus forming some form of combination between a partnership and a company which is called a hybrid. For all the partners which are present, it is compulsory for them to contribute towards the LLP which is as mentioned specified in the LLP Agreement. Now the shares of the member can be in various forms such as; tangible or intangible, movable or immovable property, monies and cash.

Governing law and essential clauses in LLP agreement

Limited liability partnership is regulated by Limited Liability Partnership Act, 2008 which was established on April 1, 2008. There are a total of 81 Sections and 4 schedules that state that most of the forms will have to be filed with MCA for a successful limited liability partnership agreement.

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Limited liability partnership agreement refers to a written contract that can be either between designated partners and the LLP or either between the partners of the LLP. It states the rights and the duty of the designated partners toward each other as well as toward the LLP. It is mandatory for the LLP agreement to be executed and filed with MCA and that too under 30 days after the incorporation of the limited liability partnership agreement. There are some essential clauses from the LLP agreement apart from boilerplate clauses which are stated down below.

  • Capital contribution clause

It can be defined as the total sum of money which is provided by each partner towards the LLP but which is done at the time of its incorporation. The LLP agreement states that no percent of interest will be provided to the partners who have contributed their money.

  • Profit/loss sharing ratio clause

This can be defined as whatever the profit/loss ratio will be, it will be shared among the members of the LLP agreement.

  • Drawing clause

 It states that each member will be allowed and has the right to borrow a certain amount of money from the pool of the LLP every month.

 This is a payment on account of each member’s annual profit share and is a recognition that members will have personal requirements which they might not otherwise be able to meet if they were to wait till each member’s profit share would be stated at the year-end. This claim is known as drawings and needs to be included under the agreement clause.

  • Indemnity clause

LLP Members of the limited liability partnership agreement, all have some compulsory obligations towards the limited liability partnership agreement. Any obligations which are owed by the partners towards the limited liability partnership agreement are included under this clause. Each member has the right to be indemnified against any losses caused to them despite each one of them carrying out their duties and obligations according to the rules established by the LLP.

  • Non-compete clause

If any of the members of the company get retired or terminated then they are prevented in terms of doing any business within a specified geographical location which seems to be in the nature of competing with the firm’s business.

  • Finance

Under this clause, if any resources of the firm are being used by the members of the firm for their own personal gains without the authority of the other members, then it is restricted. It can also restrict decisions that are based on personal connection or which benefit family members.

  • Accounts

Under this clause, all the accounts and books of accounts are kept in detail and these have to be maintained by the Limited Liability Partnership Agreement, on a timely basis and also according to the accounting standards established.

  • LLP banks

This clause contains the details as to the bank and its address to which LLP and its transactions are related.

  • Rights And liabilities

This clause is added to have a fair understanding as to what rights would the partners enjoy and what would be the plausible liabilities. Examples of such rights could be the right to draw a salary from the firm. 

How to get registration of limited liability partnership (LLP) done?

Step 1: Obtain digital signature certificate 

A digital signature of the designated partners of the proposed LLP needs to be applied before the process of registration is initiated. All the documents for the registration can be filed online and need to be digitally signed. So, the designated partner needs their digital signature certificates from recognized agencies authorised to certify such certificates.

Step 2: Apply for Director Identification Number (DIN)

Application for the DIN of all the designated partners or those intending to be designated partners of the proposed LLP needs to be moved which is to be made in Form DIR-3.

For the said purpose, a scanned copy of certain documents (typically Aadhaar and PAN) to the form. The form needs to be attested by a Company Secretary serving the company in full time or by the Managing Director/Director/CEO/CFO of the existing company in which the applicant shall be appointed as a director.

Step 3: Reservation of name of the proposed LLP

Limited liability partnership-Reserve Unique Name a.k.a. LLP-RUN needs to be applied for the reservation of the name of the proposed LLP which is processed by the Central Registration Centre under Non-STP. It is highly recommended that before the name is quoted, the company officials conduct a free name search facility on the MCA portal. 

By doing so, it would be clear if there is any other company having closely related or resembling names and will help in choosing names not similar to already existing names. The name is generally approved only if the name is desirable in the view of the Central Government and has no similarity to any existing partnership firm or an LLP or a body corporate or a trademark.
The form RUN-LLP has to be accompanied by fees as per Annexure ‘A’ which may be either approved/rejected by the registrar. A resubmission of the form shall be allowed to be made within 15 days for rectifying the defects. There is a provision to provide for 2 proposed names of the LLP.

Step 4: Incorporation of LLP

FiLLiP (Form for incorporation of Limited Liability Partnership) is used for incorporation. It needs to be filed with the Registrar with competent jurisdiction over the state in which the registered office of the LLP is placed. 

In case a designated partner does not have a DPIN or DIN, he/she may take help of this form since it provides for applying for allotment of DPIN as well. The allotment application will be allowed when it is made by two individuals only. If the name that is applied for is approved, then this approved and reserved name shall be filled as the proposed name of the LLP

Step 5: Filing the limited liability partnership (LLP) agreement

LLP agreement not only governs the rights and duties that shall be among the partners but also the ones between the LLP and its partners. The LLP agreement can be filed in form-3 online on MCA Portal Form 3 and the LLP agreement has to be filed within 30 days of the date of incorporation. It needs to be printed on Stamp Paper.

Dissolution or winding up of LLP

A. Voluntary winding up

Under this, the partners may decide among themselves to terminate and stop the operations of the LLP and wind up the firm and put an end to the limited liability partnership.  For the said purpose, a resolution approved by 3/4th of the total number of partners has to be passed. Further, a copy of the resolution is mandatory to be filed with the Registrar within 30 days of passing such resolution and a copy of the same has to be given to the person appointed for handling the wind-up.  

B. Compulsory winding up

Compulsory winding up is a process through which the tribunal orders the winding up and dissolution of LLP. The same could be asked for due to a variety of reasons, for instance: 

  1. In case the number of partners of the LLP has been reduced below two for a period of more than six months,
  2. In case the LLP is incapable of paying its debts;
  3. In case the LLP has acted contrary to the interests of the sovereign integrity of India, the security of the State or maybe public order;
  4. In case the LLP has defaulted in filing with the Registrar the Account statement and Solvency or annual return for five consecutive financial years; or
  5. If a Tribunal is of the opinion that it is in the interest of justice and equity that the LLP be wound up.

C. Winding up of LLP with creditors

For the said purpose, partners in the majority have to make an announcement in Form-2 providing that they have no sum unpaid or they will pay their debts within a stipulated time period as fixed by the partners but not above a year from the date of passing of the resolution for the purpose of winding up.

Publication of Resolution: It is necessary that within 14 days of passing of winding up Resolution and receiving the creditors’ consent, LLP gets an advertisement published regarding the resolution of winding up in a newspaper being read widely in the territory where the registered office of LLP is situated.


This article was written with the objective of providing as much information about LLP as possible. LLP has been looked upon as a reliable solution for many professionals for its inherent advantages that conventional partnership setup fails to provide. It obviously includes that each partner is responsible for his own deeds or negligence and is not answerable for the acts of another partner wholly. Even the concept of LLP came to be recognised in our country very late, but its growth stands testimony to the acceptance it has received in the country. 



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