Complete overview ofChange in Partners in an LLP
A change in partners or designated partners alters one of the basic foundations of a Limited Liability Partnership. Entrecap drafts the amendment deed, gets it stamped and files Forms 3 & 4 with the Registrar — on time, with every attachment in place.
What counts as a change in partners?
Designated Partners are the LLP’s equivalent of Directors in a company. They are ‘designated’ by all partners to comply with the LLP Act, 2008.
- 01
Admission of a new partner
A new partner — or designated partner — is brought into the LLP.
- 02
Retirement of a partner
An existing partner retires or resigns from the LLP.
- 03
Admission cum retirement
Two events at the same time — one partner joins as another leaves, in a single deed.
- 04
Change in designation
A partner becomes a designated partner, or vice-versa.
- 05
Change in nominee of a corporate partner
The body corporate remains the partner, but the individual it nominates to act for it changes. Strictly not a change in partner — for all practical purposes, just as big a change. The new nominee needs a DIN and digital signature.
Changing a director in a company instead? Read more about Change in Directors →
How a change in partners is completed
Every change happens through an amendment deed — an admission deed, a retirement deed or an admission cum retirement deed.
Agree terms & review the LLP Agreement
Partners agree the commercial terms. The existing LLP Agreement is reviewed for admission and retirement mechanics, notice, profit-sharing and capital clauses.
We review your LLP Agreement and advise on how best to structure the change.
We review your LLP Agreement and advise on how best to structure the change.
Obtain DIN & draft the amendment deed
If the new partner will be a Designated Partner, they first obtain a Director Identification Number by filing Form DIR-3, attested by the new and an existing partner. The admission, retirement or admission cum retirement deed then lays down the agreed terms — effective date, capital contribution and other clauses.
DIN only for designated partnersWe prepare the DIR-3 application and draft the deed — capital, duties & rights, remuneration and profit-sharing clauses.
We prepare the DIR-3 application and draft the deed — capital, duties & rights, remuneration and profit-sharing clauses.
Stamp the deed & file Forms 3 & 4
The deed is stamped as per the capital contribution and state rules, then Forms 3 and 4 are filed with the Registrar of Companies — with the amendment deed attached — conveying every detail of the change.
⏱ Within 30 days of the effective dateWe work out the stamp duty, execute the deed and file Forms 3 & 4 through to approval.
We work out the stamp duty, execute the deed and file Forms 3 & 4 through to approval.
Update banks & stakeholders
Bank mandates and other stakeholders are updated so the new partnership is reflected everywhere it matters.
We assist with bank mandates and updating other stakeholders.
We assist with bank mandates and updating other stakeholders.
FEMA and Income-tax: get these right too
A change in partners can also trigger FEMA and Income-tax rules, alongside Forms 3 & 4.
When a non-resident joins or exits
- Resident designated partner. Must be retained through the change.
- FDI rules. Apply, with valuation, if the incoming or exiting partner is a non-resident.
- RBI reporting. Forms LLP(I) and LLP(II), and the annual FLA return, as applicable.
Reconstitution & capital gains
- Reconstitution. Triggered by a retirement, a new admission, or a change in profit-sharing ratio.
- Section 9B. Assets the LLP transfers to a partner on reconstitution are taxed to the LLP at fair market value.
- Section 45(4). Money or assets a partner receives on reconstitution are taxed to the LLP as capital gains.
Testimonial
We Are What Our Clients Say About Us
“Entrecap Business Services executed our deed for admission cum retirement of partners in our LLP during the second wave of pandemic and completed the entire process in time bound manner with all documentation.”
Designated Partner at AM Business Solutions LLP
What counts as a 'change in partners'?
- Admission of a new partner or designated partner.
- Retirement (or resignation) of a partner.
- Admission cum retirement — one partner comes in as another goes out, in the same deed.
- Change in designation — a partner becomes a designated partner, or the other way round.
- Cessation by death, insolvency, or expulsion (expulsion only if the LLP agreement allows it).
What is a designated partner, and how is it different from a partner?
Every designated partner is a partner, but not every partner is a designated partner.
A partner is an owner. He or she brings in capital, shares profits and takes part in the business as the LLP agreement allows.
A designated partner is a partner who has also been 'designated' by the LLP to handle its legal compliance under the LLP Act, 2008 — filings with the Registrar, annual returns, statutory records. In practice, designated partners are to an LLP what directors are to a company.
How many partners and designated partners does an LLP need?
- At least two partners. There is no upper limit.
- At least two designated partners, who must be individuals.
- At least one designated partner must be resident in India — that is, he or she has stayed in India for at least 120 days in the financial year.
Who can become a partner — and who cannot?
Can: an individual (Indian or foreign), an Indian company, an Indian LLP, a foreign company or a foreign LLP.
Cannot: a minor, a person declared of unsound mind by a court, an undischarged insolvent (or one whose insolvency application is pending), a partnership firm, or an HUF as such. The Karta of an HUF can join in his individual capacity — but then it is his personal investment, not the HUF's.
Can an LLP have only two partners, both of whom are Designated Partners?
Yes.
An LLP can have two individuals who are both Partners and Designated Partners.
Can a company or another body corporate become a Designated Partner?
A body corporate can be a Partner of an LLP, but it does not itself act as the individual Designated Partner. A body corporate has to nominate an individual to act as its nominee Designated Partner, subject to the LLP Act and applicable requirements.
The identity and eligibility of the nominee should therefore be considered before finalising the LLP restructuring.
Is a designated partner personally exposed for the LLP's debts?
No. For the LLP's business debts, every partner's liability is limited to the contribution he or she agreed to bring in, and no partner is liable for another partner's wrongful acts except in very very limited and narrow circumstances.
The extra exposure of a designated partner is compliance exposure — late or missed filings attract penalties on the LLP and on its designated partners. Check the next FAQ.
Can a Partner become a Designated Partner later or vice-versa?
Yes.
A Partner can become a Designated Partner in accordance with the LLP Agreement and the applicable statutory requirements.
The change in designation needs to be appropriately documented and reported to MCA.
What are the main responsibilities of a Designated Partner?
The exact statutory responsibilities generally include
- Filing annual returns
- Filing Statement of Account and Solvency
- Filing changes in Partners and Designated Partners
- Maintaining statutory records
- Ensuring that required disclosures are made
- Coordinating with auditors, accountants and professional advisors
- Ensuring that changes in the LLP Agreement are appropriately recorded and filed
The statutory responsibility ultimately sits with the LLP and its Designated Partners.
I have just incorporated an LLP and am a designated partner. What should I keep in mind?
There are certain compliances like entering a properly executed LLP Deed and filing Form 3 within 30 days of incorporation. An entire list is mentioned here.
What is DPIN and does every Partner need one?
No.
Only designated partners require a Designated Partner Identification Number (DPIN).
Therefore, when admitting a new Partner, the LLP should first decide whether the person is being appointed only as a Partner or also as a Designated Partner.
What happens if a Designated Partner does not complete DIR-3 KYC?
Non-compliance can result in the DIN/DPIN being marked as non-compliant/deactivated and can create practical difficulties when the individual needs to digitally sign or participate in MCA filings. No LLP forms can be filed where the DIN/DPIN of a designated partner signing it is deactivated.
What should a foreign national keep in mind before becoming a Designated Partner in a particular LLP?
A foreign national should ideally check four things before appointment:
- Whether the LLP is eligible to receive Foreign Direct Investment (FDI)
- Whether the individual can obtain/hold the required DIN/DPIN considering his or hers immigration, Tax, FEMA position and the LLP Act
- Whether the statutory resident Designated Partner requirement continues to be satisfied
There may also be additional documentation and certification requirements for foreign identity and address documents.
Entrecap's International Desk can assist where the appointment involves a non-resident individual or overseas corporate group. You can check it here.
How can a new Partner be admitted to an LLP?
Once the commercial terms are agreed, the deed of admission of the partner has to be properly executed with required stamp duty. The required forms 3 and 4 have to be filed with the jurisdictional Registrar of Companies.
What documents are generally required for admission of a Partner?
For an individual, documents may include:
- PAN and Adhar
- Address proof
- Identity proof and Residence proof
- Consent to become Partner
For a body corporate, corporate authorisation and nominee details may be required.
For foreign individuals or foreign entities, additional certification, notarisation/apostille/consularisation and FEMA-related documentation may be required depending on the circumstances.
Can a new Partner be admitted without changing the LLP Agreement?
No. Admission of a partner has to be reflected in the deed of admission since it’s an amendment to the original deed. The revised deed is a specific attachment with the Forms 3 and 4 used to record the change in partners with the Government.
Why should I review the LLP Agreement before admitting or retiring a Partner?
Because the existing Agreement may specify:
- How admission or retirement takes place
- Whether a notice period applies
- Specific clauses about First right of refusal
- Valuation of goodwill
- How profit is allocated up to the retirement date
- How disputes are handled
Before drafting a new deed, Entrecap recommends reviewing the existing LLP Agreement and identifying which provisions need to change.
Does the admission or retirement deed really need to be stamped?
Yes. An under-stamped deed is not admissible as evidence until the deficit duty and penalty are paid — which means it fails you at the one moment you need it: a dispute. It is also the document attached to Form 3, so it should be in order before filing.
How much stamp duty is payable?
Stamp duty is a state subject, so it depends on the state or union territory and, usually, on the capital contribution.
Where property (say, an office premises) is brought into or taken out of the LLP through the deed, conveyance-level duty can apply on top of the partnership duty.
A Company from Mumbai wishes to be a partner in Delhi. How does that work?
A company acts through a nominee — an individual it appoints by a board resolution..
Points to note:
- The nominee needs a DIN and digital signature like any designated partner.
- The board resolution should name the nominee and authorise him or her to sign the LLP agreement and deeds.
Company can also replace its nominee at any time and follow the same procedure as earlier.
Can the other partners remove a partner?
Only if the LLP agreement expressly gives that power. Under the default rules of the LLP Act, a majority cannot expel a partner. Many disputes we see trace back to an agreement that never addressed this.
I have retired from an LLP. What should I tie up?
- Confirm Forms 3 and 4 are filed and approved by the LLP
- Get off the bank mandate and hand back cheque books, net-banking access etc.
- Get released from personal guarantees you gave to banks, landlords or suppliers..
- Ensure key clients, suppliers and lenders are informed in writing.
- Receive your capital settlement as per the deed
- Check the GST registration is amended.
- Keep your DIN KYC current even after retirement.
What happens when a partner dies?
The partner ceases to be a partner. The legal heirs are generally entitled to receive the deceased partner's capital and share of accumulated profits as the agreement provides, but they do not automatically become partners or get a say in management. A Form 4 is filed for the cessation, and the agreement is amended if needed.
What if a Designated Partner leaves suddenly?
- This should be dealt with promptly.
- The LLP should first determine whether the departure results in non-compliance with the requirement for the prescribed number of Designated Partners and the resident Designated Partner requirement.
- If yes, the LLP should first act on an admission of a partner before retirement to comply with the LLP Act.
What are the timelines under FEMA require when a foreign partner joins or exits?
Event | Filing | Deadline |
Foreign partner's capital contribution received | Form LLP(I), on the RBI's FIRMS portal through the AD bank | 30 days from receipt of funds |
Capital contribution or profit share transferred between a resident and a non-resident | Form LLP(II) | 60 days from receipt of funds |
Every year the foreign investment is held | Annual return on Foreign Liabilities and Assets (FLA) | 15 July after the end of financial year |
You can check our FEMA Consultancy page in detail here.
Which other things need to be taken care of for a foreign partner’s entry/exit?
- Valuation guidelines for fair price
- Money must come in via normal banking channels
- Translation and Notarisation/Apostile/ Authentication requirements
- FIRC/ KYC requirements
Have you worked with a Company from UK as a partner in Indian LLP?
Yes, CA. Bhavesh Savla and his team have worked with UK Companies and individuals looking to set up LLP in India. From experience, we know the issues with KYC requirements from the UK bank especially with the Data Protection Act.
Can a foreign Partner receive a share of profit from an Indian LLP?
Yes. But the LLP needs to consider the tax and FEMA treatment of the Partner's profit share separately from remuneration or interest.
The remittance of profits may require Forms 145/146 to be filed to avoid any tax on the Indian side.
How can Entrecap help with change in Partners in an LLP?
Depending on the assignment, Entrecap may provide the following services:
- Reviewing the existing LLP Agreement
- Understanding/ advising the proposed restructuring
- Drafting an Admission Deed/ Retirement Deed/ Admission-cum-Retirement Deed including all clauses related to capital, duties and rights, remuneration and profit-sharing clauses
- DIN/DPIN, DSC and DIR -3 KYC related documentation
- Filing MCA Forms 3 and 4
- Assisting with bank and other stakeholder updates
Entrecap Business Services has handled 75+ LLP Partner-change assignments, including admission, retirement, admission-cum-retirement and changes in Designated Partners. Clients can check out reviews from genuine clients on the website and on our google listing.