In today’s dynamic business environment, the Limited Liability Partnership (LLP) model offers a flexible yet structured option for entrepreneurs and professionals. Combining the operational flexibility of a partnership with the limited liability features of a corporation, LLPs have become increasingly popular, especially among legal, financial, and consulting firms.
However, to make the most of this structure, it’s crucial to understand the rights and duties of LLP partners, both statutory and contractual. These form the foundation of sound governance, legal compliance, and long-term success.
Each partner in an LLP has the right to take part in the management and decision-making process of the business unless the LLP agreement states otherwise.
Partners have unrestricted access to the books of account and other records of the LLP. This ensures transparency and accountability among all members.
Every partner is entitled to an equal share in the profits (or losses) of the LLP, unless the LLP agreement specifies a different profit-sharing ratio.
A partner is entitled to indemnification by the LLP for any personal liability incurred while performing duties in good faith and in the normal course of business.
Partners can assign their share of profits and losses to another person. However, such an assignment does not automatically entitle the assignee to participate in management or access confidential information.
Partners must act honestly and in good faith in all dealings with the LLP and with fellow partners. This includes disclosing conflicts of interest and not competing with the LLP.
Every partner is expected to carry out their duties with reasonable skill, care, and diligence, especially in decision-making and representation of the firm.
If a partner derives any personal gain from a business transaction related to the LLP without disclosure, they must account for such profits to the firm.
Partners must not disclose sensitive information about the LLP to external parties, both during the partnership and after their exit.
Each partner is required to contribute to the LLP’s capital as agreed in the LLP agreement. This could be in the form of cash, property, or services.
In most jurisdictions, including India (under the Limited Liability Partnership Act, 2008), these rights and duties are partly defined by statute and partly by the LLP agreement. Where the agreement is silent, the provisions of the applicable LLP Act will apply by default.
Understanding the rights and duties of LLP partners isn’t just a legal formality—it’s a practical necessity. A well-drafted LLP agreement that clearly outlines these responsibilities can prevent disputes, foster collaboration, and ensure long-term sustainability.
Whether you're forming a new LLP or reviewing an existing one, taking the time to clearly define and understand each partner’s role is a smart investment in your firm's future.