Various conditions are led down by the Limited Liability Partnership Act, 2008, for eligibility of a designated partner. Any Individual or a corporate body may be a partner in a Limited Liability Partnership with a minimum of 2, one of which should be a resident individual in India.
A Limited Liability Partnership is possibly the best alternative for someone who wants the benefits of limited liability of a company with low compliance and with the structure of a partnership. Since a partnership contains both the fundamental structures of a company, it is called a hybrid between a company and a partnership.
Did You Know? Designated partners are not liable for the affairs of the Limited Liability Partnership in their capacity unless they acted fraudulently to deceive a third party.
What is a Limited Liability Partnership?
A designated partner is a person who is responsible for the day-to-day management and affairs of a partnership firm. In a partnership firm, the designated partner is typically one of the partners who has been chosen to take on additional responsibilities and authority, and is typically responsible for overseeing the financial and operational aspects of the business.
A Limited Liability Partnership is a new legal business entity with limited liability. It is an alternative corporate entity vehicle that not only gives the benefits of limited liability at low corporate compliance but allows the partners to manage their business like a conventional partnership but with the benefit of a company form of business. The Limited Liability Partnership is a separate legal entity from its members (Partners) and, therefore, forms and enters into legally binding contracts or agreements in its capacity without passing on the liability to its partners.
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Eligibility For a Designated Partner
In India, a designated partner is a person who is responsible for the day-to-day management and affairs of a partnership firm.
To be eligible to be a designated partner, a person must meet the following criteria:
- Age: The person must be at least 18 years old.
- Citizenship: The person must be an Indian citizen.
- Mental capacity: The person must be of sound mind and capable of understanding the nature and consequences of their actions.
- Criminal record: The person must not have been convicted of any offenses involving fraud or dishonesty.
- Educational qualifications: The person must have passed the 10th grade or equivalent.
- Disqualifications: The person must not be disqualified from being a partner under any law for the time being in force.
It is worth noting that these eligibility criteria may vary depending on the specific laws and regulations governing partnership firms in a given jurisdiction. It is important to consult with a legal professional to ensure that you meet the necessary requirements to be a designated partner.
What is the Required Number of Designated Partners?
Every Limited Liability Partnership must have at least 2 partners. The Limited Liability Partnership will be required to maintain the minimum number of 2 partners within 6 months from the date of such an event. In India, the required number of designated partners in a partnership firm depends on the type of partnership firm. In a general partnership firm, there must be at least two designated partners. In a limited liability partnership (LLP), there must be at least two designated partners, at least one of whom must be a resident of India.
Suppose the Limited Liability Partnership failed to maintain the minimum limit of the designated partner of 2 within the stipulated time of 6 months. In that case, The person who is the only partner within the period exceeding 6 months may be held personally liable for all the affairs of the Limited Liability Partnership during the time of mismanagement.
Designated Partner Identification Number
A designated partner identification number is necessary for all partners in a partnership. Despite being referred to by various names, designated partner identification number and director identification number are interchangeable. A class 2 digital signature for the partner is required to get the designated partner identification number.
To be registered, the incorporation paperwork must name specific individuals as Designated Partners for the limited liability partnership. The role of the Designated Partner may be subject to review and rotation under the deed. Any person may, with the approval of the other partners and the Limited Liability Partnership can become a designated partner.
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Duties of a Designated Partner
It is the prime responsibility of the designated partners to manage the affairs of the Limited Liability Partnership, just like the Board of Directors in a Company. However, it is not the end of their duties.
There are few duties for Designated Partner which are as follows:
- The Statement of Account and Solvency is an annual document filled by the Limited Liability Partnership with the registrar at the year-end and is required to be signed by the Designated Partner.
- The Limited Liability Partnership must submit annual returns to the registrar in a prescribed manner within 60 days following the end of the financial year. Every Designated Partner shall be subject to a fine not exceeding ₹10,000.
- A Designated Partner is responsible for paying back costs associated with an investigation.
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Appointment of Designated Partner
Following are the relevant provisions regarding the appointment of a designated partner as laid down under the Limited Liability Partnership Act, 2008 :
- For a valid appointment, the person proposed to be appointed as a designated partner must show his consent or willingness to be appointed as a designated partner in Form 9 to the registrar.
- The Limited Liability Partnership must file form 4 with the registrar containing the details like name, address, and other relevant details to the registrar.
- Where there is a change in the number of designated partners in a Limited Liability Partnership, an intimation must be filed with the registrar in form 10.
- Once the designated partner is appointed, the Limited Liability Partnership must file form 5 within 30 days of his or her appointment.
Conclusion
A limited liability partnership (LLP) is a form of business in which the partners have limited liability for the debts and obligations of the partnership. In an LLP, the partners are not personally responsible for the partnership's debts and obligations, and their personal assets are typically protected from creditors. LLPs are often used by professional service firms, such as law firms, accounting firms, and consulting firms, because they offer the benefits of a partnership structure (such as shared profits and decision-making) while limiting the personal liability of the partners.
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