Limited Liability Partnership Firm

Appointment procedure of Designated Partner in LLP

calendar27 Jul, 2020
timeReading Time: 4 Minutes
designated partner in LLP

A Limited Liability Partnership (LLP) works under the strict provision of Limited Liability Partnership Act, 2008. Unlike other business models, LLP discourages stringent compliances. It is the only reason why the LLP-based business model is gaining a lot of popularity in the business arena.  

designated partner in LLP

Advantages of LLP

  • The personal liabilities are limited for each of the LLP’s partners.
  • The company’s directors are accountable for making the majority of the decisions.
  • There is no predetermined tenure of working in LLP. Every member has a right to leave the company whenever they want.
  • Provision under LLP doesn’t impose any restriction on account of joining or transferring on the members. 

Eligibility for Designated Partner in LLP

  • Only individuals have the right to become designated partners in the LLP-based company’s model. The private organization, firms, or other active companies cannot become designated partners in the LLP.
  • The unique identification number is a must-have requirement for an applicant.
  • Partnership in LLP.
  • A minimum of two designated partners is required to set up an LLP-based company model.
  • There is no threshold limit in the LLP on account of the number of partners. 
  • At least one designated partner should be an Indian national.
  • The consent letter must furnish by the Designated Partners.
  • The minimum age criteria for an individual joining LLP as a partner in 18 years.

Read our article:Modified LLP Settlement Scheme, 2020

Entities that cannot serve as a designated partner in LLP

  • Bankrupt personal cannot apply for this designation.
  • Individuals tagged as a payment defaulter by creditors such as private financial lenders
  • Individuals having a long history of fraudulent activities cannot serve a designated partner in LLP
  • Minors

Procedure for the appointment of a designated partner in LLP

There are few procedure to appoint a designated partner in LLP. Those are as follows:-

Apply for Digital Signature Certificate

DSC is mandatory when it comes to the appointment of a designated partner. The applicant needs to furnish the following document to obtain DSC.

  • PAN Card of the proposed partner.
  • Aadhaar Card of the proposed partner.
  • Photo of the proposed partner.
  • Email Id of the proposed partner.
  • Phone number

Apply for DIN Number

After fulfilling the above requirement, the DIN will be applied in the Form DIR, available on the MCA’s website. The form will be submitted along with identity and address proof of the applicant.

Passing a resolution in a Board meeting

Once the concerned authority allotted a DIN to the designated partner, the LLP’s partners will conduct a meeting to authenticate the recruitment of a designated partner in the partnership agreement.

Inclusion of partner name in agreement

Next, the LLP partner drafted a supplementary partnership deed to incorporate the name of the proposed partner. The applicant will furnish the consent Letter to the LLP regarding its joining. As soon as the documentation mentioned above is prepared, the partner will file Form-4 within thirty days of the appointment.

Next, the Form-3 will be furnished to the concerned authority along with partnership deed within the thirty days of the appointment. After furnishing the forms mentioned above, the MCA will grant permission to the LLP to add the proposed partner. The applicant needs to visit the MCA website to see whether the name of the designated partner is appended or not.

What is Digital Signature Certificates?

A Digital Signature is nothing but a digital key that is supposed to authenticate the holders’ identity. The issuing of DSC is in the hand of certifying authority (CA). Such authentication is carried out by the electronic means as per Section 3 of The Information Technology Act, 2000[1].

Moreover, the DSC contains essential details such as the APNIC account name and an email address. DSC excels on public key infrastructure and a private key encrypts it. Thus, it can be treated as an authentic medium that establishes the credential of the concerned entity during the online business. DSC is a legal way of authorizing electronic documents on the online platform.

What is the Director Identification number?

Director Identification Number or DIN (MCA) is an encrypted 8-digit identification number allotted to the individual seeking position of a Director in a company. The central government is the only legal body that allots the DIN to the individual. For the time being, DIN doesn’t come with an expiration date; thus, it offers lifetime validity to its users.

DIN not only acts as an identity for an individual, but it also helps the government keep the database of an existing director. The DIN is supposed to mention underneath the Director’s signatures.

Important points to remember

  • A person with a fraudulent background cannot apply for a partner in LLP
  • The inclusion of minor individual is prohibited in LLP
  • Digital Signature Certificate and Director Identification numbers are mandatory for a person seeking partnership in LLP. 
  • A board meeting also plays a vital role in the appointment of a designated partner in LLP.
  • A minimum of two designated partners is required to set up an LLP-based company model.

Conclusion

For the time being, LLP is one of the trending business models in the current time. With less compliance on board, LLP, as a firm, thrives more seamlessly than any other business model. With that said, it also offers the provision for adding a partner through a predetermined legal procedure. Adding a partner in LLP is a rather a simple task provided the applicant follows the process carefully and provides document accordingly.

If you need some assistance in this context, we are open to help. Go ahead and use our comment section to drop the queries. We will make sure that your question will be answered in no time. Our CorpBiz group be at your service if you need technical advice on LLP registration or compliance.

Read our article:MCA Introduced LLP Settlement Scheme, 2020 for Defaulting LLPs

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