Admission or Resignation of Partner in LLP

In a Limited Liability Partnership (LLP), Partners can be admitted or removed easily without any changes to the constitution or substance of the LLP. When compared to a traditional partnership firm, one of the major advantages of an LLP is its separate legal identity, which allows for an easy change in the ownership while maintaining business continuity. In this article, we look at the procedure for admission or resignation of a partner in an LLP. For assistance with admission or resignation of LLP Partner, contact IndiaFilings.

Admission of Partner

In most

LLP Agreements and as per the First Schedule to LLP Act, no person can be admitted as a partner in an LLP without the consent of all existing partners. However, the LLP Agreement can authorize one or more partners to approve the admission of a new partner without having to obtain the approval of all Partners. Hence, before starting the process for admitting a new partner, its important to read the LLP agreement carefully on the requirements for admitting a new partner. If the LLP agreement is silent on the procedure for admission of new partner, then the consent of all existing partners would be required as per the first schedule to the LLP Act.

Requirements for New Partner

Any person who wishes to become a Partner in an LLP must be above the age of 18. He/she must also have a valid PAN or Passport. Before initiating the procedure for admission, the partner to be admitted must

obtain digital signature (DSC) and Director Identification Number (DIN). Once DSC and DIN is obtained, then the formalities for an appointment can be initiated by the LLP.

Filing of Form 4

After admitting the partner, the LLP should file Form 4 within 30 days from the date of admission. Form 4 must be signed by the Designated Partner. The Form should contain a statement of consent by the newly inducted partner. The form should be accompanied by a certificate from a Company Secretary/

Charted Accountant/Cost Accountant in practice stating that he/she has verified the necessary particulars, including the books and records of the Limited Liability Partnership and found them to be true and correct.

Government Fee for Admission of Partner

The Government fee for filing Form 4 to admit a Partner in an LLP is as below:

Limited Liability Partnership whose contribution is limited to Rs 1,00,000 -Rs 50.
Limited Liability Partnership whose contribution exceeds Rs 1,00,000 but is limited to Rs 5,00,000 - Rs 100.
Limited Liability Partnership whose contribution exceeds Rs 5,00,000 but is limited to Rs 10,00,000 - Rs 150.
Limited Liability Partnership whose contribution exceeds Rs 10,00,000 - Rs 200.

Resignation of a Partner

In case a partner decides to vacate his/her position as a partner in accordance with the LLP agreement and the consent of other partners, then the procedure mentioned or decided by the partners can be adopted. In the absence of an agreement, a partner can resign by intimating the other partners with a notice. Such a notice must be issued 30 days prior to the date of resignation. Resignation from a LLP will not automatically discharge the liabilities of the Partner with respect to the LLP. The partner can be held responsible for his/her actions and liabilities prior to resignation - even after the date of resignation. In case of removal or resignation of a partner, he or she is entitled to his/her share of the LLP. The amount of monies to be paid to the resigning partner can be decided mutually by the partners. In case of death or insolvency of the partner he/she should receive the following:

An amount that is equivalent to the capital contribution of the former partner actually made.
His/her 'right to share' in the accumulated profits after deduction of accumulated losses, which is determined based on the date of resignation of the former partner.

Process for filing resignation of Partner from LLP.

Transfer of Partner's Rights

A partner may transfer his/her right to share the profits and losses to any other person, and to receive distribution in accordance with the LLP Agreement. The transfer of rights will not by itself lead to the dissolution and winding up of the LLP. A mere transfer of right would not permit the transferee to participate in the affairs of the business. In addition to it, he/she wouldn’t be provided with access to any information pertaining to the transactions of the LLP.

Removal of Partner by Voting

In a LLP, a majority of Partners will not be able to remove a partner by voting unless the LLP agreement contains such a provision. Hence, while drafting the LLP agreement, the partners must read through and ensure that their rights are protected.

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Frequently Asked Questions

Common questions about Admission & Resignation of Partner in LLP.

The procedure for admitting a new partner into an LLP involves obtaining consent from all existing partners, unless the LLP agreement authorizes one or more partners to approve the admission. The new partner must obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN). After admission, the LLP must file Form 4 with the Ministry of Corporate Affairs within 30 days, along with a certificate from a practicing professional.

As per the LLP Act, any person who wishes to become a partner in an LLP must be above the age of 18 and must have a valid PAN or Passport. Additionally, the new partner must obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN) before the admission process can be initiated.

The government fee for filing Form 4 to admit a new partner in an LLP varies depending on the total contribution of the LLP. It ranges from Rs. 50 for LLPs with a contribution up to Rs. 1 lakh to Rs. 200 for LLPs with a contribution exceeding Rs. 10 lakhs.

If the LLP agreement specifies a procedure for resignation, the partner must follow that process. Otherwise, a partner can resign by intimating the other partners with a notice at least 30 days prior to the date of resignation. However, the resigning partner may still be held responsible for liabilities incurred before the resignation.

A partner can transfer their right to share profits and losses, as well as the right to receive distributions, to another person as per the LLP agreement. However, the transferee will not be able to participate in the affairs of the business or have access to information about the LLP's transactions unless they are admitted as a partner.

No, a majority of partners cannot remove a partner from an LLP by voting unless the LLP agreement contains a specific provision allowing for such removal. The LLP agreement should be carefully drafted to protect the rights of individual partners.

Upon resignation or removal, a partner is entitled to receive their share of the LLP, which includes their capital contribution and their right to share in the accumulated profits after deducting accumulated losses, as determined on the date of resignation or removal.

No, a partner's resignation from an LLP does not automatically discharge their liabilities towards the LLP. The resigning partner can still be held responsible for their actions and liabilities incurred prior to their resignation, even after the date of resignation.

In case of a partner's death or insolvency, the partner or their legal heirs are entitled to receive an amount equivalent to the partner's capital contribution and their right to share in the accumulated profits after deducting accumulated losses, as determined on the date of death or insolvency.

Yes, unless the LLP agreement authorizes one or more partners to approve the admission of a new partner, the consent of all existing partners is required for admitting a new partner into an LLP, as per the First Schedule to the LLP Act.