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LLP Partner Changes How to Add, Remove, and Keep Your Business Moving

Author : Govind J | Published On : 04 Apr 2024

A Limited Liability Partnership is run by its partners. From its management to the operation, the partners direct the LLP towards its goals and vision. New partners are added or existing leave; it does not affect the status of the LLP, but surely impacts the growth of the business and responsibilities of other partners. The change in partners and their details can be affected only after approval from the Ministry of Corporate Affairs. To add or remove a partner from the LLP, the consent of other partners must be obtained, which is followed by a change in the LLP Agreement and an application to MCA to approve the changes. The application to MCA must be filed within 30 days of the effective date of the change.On this Blog Post StartUpPortal Business Services expert explores the complications of partner changes in LLPs, covering reasons for transitions, eligibility criteria, and structured processes for admitting new partners, handling resignations, and managing partner removal or exile.

What is partner change in LLP?

Partner change in a Limited Liability Partnership( LLP) refers to the process of changing the composition of partners within the organization. This can involve various scenarios such as adding new partners, removing existing partners, or replacing partners due to factors like disagreements, retirement, or strategic realignment of business objectives. Partner change can significantly impact the dynamics, decision-making processes, and overall direction of the LLP. It requires careful consideration, legal compliance, and effective communication among the partners involved to ensure a smooth transition and durability of operations.

Why do we need to change Partners?

Changing partners in an LLP is vital for business growth and sustainability. It may be necessary to bring in new partners with specific expertise, resolve disagreements, or accommodate changes in particular circumstances. Also, adjusting the partnership structure can attract new talent and investment, fostering invention and acclimating to market dynamics, eventually ensuring the business’s nonstop success.

Who can become a partner in a LLP?

Partners in a Limited Liability Partnership( LLP) can vary globally, but generally, individuals or commercial entities with applicable expertise, experience, and fiscal capacity can become partners. There are generally no restrictions based on nationality or residency, making LLPs accessible to a different range of implicit partners. However, it’s essential to review the specific requirements outlined in the LLP agreement and comply with any legal regulations governing partnership eligibility. Overall, those who can contribute to the LLP’s success and align with its values and objectives are high candidates for partnership.

Who cannot become a partner in LLP?

Certain individuals or entities, such as those declared bankrupt, minors, or disqualified by law from business activities, cannot become partners in an LLP due to legal constraints. Some industries may have specific qualifications or licensing requirements. It’s vital to adhere to these restrictions to ensure legal compliance and maintain the LLP’s integrity. Additionally, partners must align with the LLP’s values and goals. Through careful screening and compliance, LLPs uphold transparency and integrity in their partnerships.

Admission of New Partner in LLP:

Documents required for Addition or Removal of partner:

  • Photograph: Passport-size photograph of the partner to be appointed
  • PAN Card: Self-attested PAN card of the partner to be appointed
  • Proof of Residence: Aadhar Card/ Voter ID/ Passport/ Driving License partner to be appointed
  • Digital Signature Certificate: DSC of the continuing partner and partner to be removed
  • LLP Agreement: LLP Agreement executed while registration and the modifications thereto

Procedure to add a designated partner:

  1. Apply for Digital Signature Certificate: The proposed designated partner shall apply for a DSC. The following documents are required for the application:
    • The PAN Card of the applicant
    • The Aadhaar Card of the applicant
    • Photo of the applicant
    • Email ID of the applicant
    • Phone number
  2. Apply for DIN Number- After the DSC, the Director Identification Number of the Director will be applied in the form DIR–3 along with the address proof and the identity proof of the applicant.
  3. Once the DIN is allotted to the designated partner, all the existing partners of the LLP will call a meeting and pass a resolution to add a designated partner to the partnership deed.
  4. A supplementary partnership deed will be drafted in which the new partner’s name will be added.
  5. Then the consent of the incoming partner will be taken in writing.
  6. After these documents are prepared, Form 4 of LLP will be filed within 30 days of the appointment from the MCA Portal
  7. After filing this form, FORM – 3 will be filed, along with the supplementary and the original partnership deed within 30 days of appointment.
  8. After the filing of all these forms, the name of the designated partner will be added and will be seen on the site of the Ministry of Corporate Affairs.
  9. If Form – 3 and Form – 4 are filed within 30 days there is an additional fee on each form of Rs. 100/- per day.

Resignation of Partner from LLP:

Resignation of a partner from an LLP involves a formal process to ensure a smooth transition. The resigning partner notifies other partners and the LLP about their decision. They settle financial obligations and liabilities according to the LLP agreement. Legal documentation may be required to formalize the resignation and adjust partnership records. The LLP may need to update regulatory filings and notify relevant authorities. Effective communication among partners and stakeholders ensures transparency and legal compliance throughout the resignation process.