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- Partnership & LLP Agreements
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Partnership & LLP Agreements
A partnership deed and an LLP agreement are the documents that set out how the partners in a business share capital, profits, work and decisions, and what happens when a partner joins, leaves or dies. In a partnership each partner is personally liable for the firm’s debts; in a limited liability partnership (LLP), liability is limited to what the partner agreed to contribute.
Partnerships are governed by the Indian Partnership Act, 1932 and LLPs by the Limited Liability Partnership Act, 2008. Where the document is silent, each Act supplies default rules, such as equal sharing of profits, which may not be what the partners intended.
When you need it
When starting a business with others
The deed or agreement should be signed before the business begins trading, not after the first disagreement.
When a partner joins or leaves
An admission, retirement or death changes the firm. The document has to be amended and, for an LLP, the change filed.
When profit shares or roles change
A change in who does what, or who earns what, should be recorded, including for tax.
When converting a firm into an LLP
Conversion keeps the business and adds limited liability, and needs a new agreement.
When the existing deed is a template
A short standard deed rarely covers expulsion, valuation of a leaving partner’s share or restrictions on competing.
How the process works
Five stages. Timings are typical, not promised.
- 1
Understand the arrangement
A call or meetingEstablish who the partners are, what each contributes in money, assets and time, how profits and losses are shared and who manages the business day to day.
Documents
- Details of the partners and their contributions
- Any existing deed or LLP agreement
- 2
Choose the form
Part of the first discussionDecide between a partnership and an LLP. An LLP gives limited liability and a separate legal identity, with annual filings. A partnership is simpler, with unlimited personal liability.
- 3
Draft the deed or agreement
Commonly one to two weeksCover the business, capital, profit share, salaries and interest to partners, authority and decision-making, bank accounts, admission, retirement, expulsion and death, valuation of a share, restrictions on competing, dissolution and disputes.
- 4
Stamp and sign
At signingPay the stamp duty set by the state, which usually depends on the capital, and have every partner sign.
- 5
Register or file
After signingRegister the firm with the Registrar of Firms, or file the LLP agreement with the Registrar of Companies in Form 3 within thirty days of incorporation or of any change.
Common questions
A partnership is not a separate legal person, and every partner is personally liable without limit for the firm’s debts. An LLP is a body corporate, separate from its partners, whose liability is limited to their agreed contribution, except in cases of fraud.
No, but it matters. Under section 69 of the Partnership Act, an unregistered firm cannot sue a third party to enforce a contract, and a partner cannot sue the firm or the other partners to enforce rights under the deed.
The First Schedule to the LLP Act applies by default. Among other things it gives every partner an equal share in capital, profits and losses and an equal say in management, whatever they may have agreed informally.
A partnership needs at least two partners and can have at most fifty. An LLP needs at least two partners, with no upper limit, and at least two designated partners, one of whom must be resident in India.
Only if the deed or agreement gives that power and it is exercised in good faith. Without an express clause, the remaining partners cannot remove a partner and may have to dissolve the firm to end the relationship.
In a partnership, the firm is dissolved on a partner’s death unless the deed says otherwise. A well-drafted deed keeps the firm going and sets how the outgoing partner’s share is valued and paid out.
Yes, more freely than an employee. The Partnership Act allows a deed to bar a partner from carrying on another business while a partner, and to restrict an outgoing partner from a similar business for a reasonable period and area.
An annual return in Form 11 and a statement of account and solvency in Form 8, with the Registrar of Companies, in addition to its income tax return. Late filing attracts a fee for each day of delay.
Related
To discuss a partnership deed or LLP agreement, write to info@ireniclegal.com or call +91 96547 47331. Written by Adv. Kanika Marwaha Bindal; last updated 7 October 2026.