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Business Laws and Ethics · Limited Liability Partnership Act, 2008

Partners, Rights and Duties and LLP Agreement in an LLP

Updated 10 October 2026 · Fact-checked

In an LLP, the subscribers to the incorporation document are the first partners; others join as per the LLP agreement. The agreement governs mutual rights and duties. If it is silent, the First Schedule applies. Each partner is the LLP's agent, not the other partners' agent. A partner leaves by agreement, 30 days' notice, or the events in Section 24.

Understand Partners, Rights and Duties and LLP Agreement

A limited liability partnership (LLP) is formed and registered under the LLP Act, 2008. It is run by its partners. So the first questions are: who is a partner, and what binds them to each other?

Who can be a partner (Section 22). On incorporation, the persons who subscribed their names to the incorporation document become the partners. Any other person becomes a partner by and in accordance with the LLP agreement. Section 2(1)(q) says the same: a partner is a person who becomes one in accordance with the LLP agreement.

The LLP agreement. Section 2(1)(o) defines it as a written agreement between the partners, or between the LLP and its partners, that fixes their mutual rights and duties and their rights and duties towards the LLP. Under Section 23(1), these rights and duties are governed by the agreement, save as otherwise provided by the Act. The agreement and any changes must be filed with the Registrar in the prescribed form, manner and fees (Section 23(2)).

Two more points on the agreement. A written agreement made before incorporation between the subscribers can bind the LLP only if all partners ratify it after incorporation (Section 23(3)). If the agreement says nothing on a matter, the First Schedule decides it (Section 23(4)).

Partner as agent (Section 26). Every partner is the agent of the LLP for the purpose of its business, but not of the other partners. This is the key difference from an ordinary partnership, where partners are agents of each other.

Designated partners. Every LLP needs at least two designated partners who are individuals, and at least one must be resident in India (Section 7). Resident means stayed in India for not less than 120 days during the financial year. If none is appointed, or only one remains, every partner is deemed a designated partner (Section 9).

Key rules to remember

Becoming a partner (Section 22)
Subscribers to the incorporation document = first partners; any other person = by and in accordance with the LLP agreement
Joining after incorporation depends on the agreement.
Governing rule (Section 23)
Agreement governs; if silent on a matter → First Schedule
Agreement and changes are filed with the Registrar. Pre-incorporation agreement binds the LLP only if all partners ratify it after incorporation.
Agency (Section 26)
Partner = agent of the LLP, not of other partners
Contrast with the Indian Partnership Act, 1932 position.
Cessation by choice (Section 24(1))
As per agreement; if no agreement, written notice of not less than 30 days to the other partners
Resignation route.
Automatic cessation (Section 24(2))
Death or dissolution of the LLP; declared of unsound mind by a competent court; applied to be adjudged insolvent or declared insolvent
No notice needed in these cases.
Former partner treated as partner (Section 24(3))
Regarded as partner for outsiders unless the person has notice of cessation or notice is delivered to the Registrar
Protects third parties.
Payout on cessation (Section 24(5))
Capital contribution actually made + share in accumulated profits after deducting accumulated losses, as at the date of cessation
Applies unless the LLP agreement provides otherwise.
Designated partners (Sections 7, 9)
At least 2 individuals, at least 1 resident in India; fill a vacancy within 30 days
If none or only one, each partner is deemed designated.

How to solve Partners, Rights and Duties and LLP Agreement questions

Use this order for any question on LLP partners, agreement, rights and duties or cessation.

  1. 1Identify what is asked: becoming a partner, content or effect of the agreement, rights and duties, agency, or cessation.
  2. 2Check for an LLP agreement. If it covers the point, it governs (Section 23(1)). Note whether it is written and filed.
  3. 3If the agreement is silent, say the First Schedule applies (Section 23(4)).
  4. 4For a pre-incorporation agreement, check for ratification by all partners after incorporation.
  5. 5For cessation, decide the route: agreement, 30 days' written notice, or an automatic event under Section 24(2).
  6. 6Apply third-party protection: a former partner stays a partner for outsiders unless they had notice or the Registrar received notice.
  7. 7For money on exit, apply Section 24(5): capital actually contributed plus share of accumulated profits less accumulated losses, unless the agreement says otherwise.
  8. 8Write the conclusion in one line, citing the section.

Quickest way: Four-question check

When to use it: For MCQs and short case-based questions where time is tight.

  1. Is there an agreement? If yes, it rules. If no or silent, First Schedule.
  2. Is the person a subscriber? Then partner on incorporation. Otherwise by agreement.
  3. Is it about outsiders? Partner is agent of the LLP, not of co-partners. Former partner remains liable-looking until notice.
  4. Is it about exit? Agreement, else 30 days' written notice; death, unsound mind or insolvency end partnership automatically.

Common mistakes in Partners, Rights and Duties and LLP Agreement

  • Saying a partner is the agent of the other partners.

    Students carry over the Indian Partnership Act, 1932 rule.

    Fix: Under Section 26 of the LLP Act, a partner is agent of the LLP only, not of other partners.

  • Treating the LLP agreement as optional and unwritten.

    Confusion with oral partnership.

    Fix: Section 2(1)(o) defines it as a written agreement. If it is absent or silent, the First Schedule fills the gap.

  • Forgetting that the agreement and its changes must be filed with the Registrar.

    Focus is on the content, not the filing.

    Fix: Recall Section 23(2): filing in the prescribed form, manner and fees.

  • Assuming a former partner is free of outsiders' claims the moment they resign.

    Ignoring Section 24(3).

    Fix: For outsiders, a former partner is still regarded as a partner unless the person had notice or notice reached the Registrar. Also, Section 24(4) keeps obligations incurred earlier.

  • Giving the wrong exit payout, such as the full agreed share value.

    Mixing up capital and profit entitlements.

    Fix: Default is capital actually contributed plus share in accumulated profits after accumulated losses, as at the date of cessation, unless the agreement provides otherwise.

  • Stating that a pre-incorporation agreement automatically binds the LLP.

    Missing the ratification condition.

    Fix: It can impose obligations on the LLP only if all partners ratify it after incorporation.

Worked examples

Example 1

Mehta, Iyer and Khan subscribed to the incorporation document of Sunrise Traders LLP. Six months later they admit Nair. There is a written LLP agreement. It is silent on how Nair's remuneration is decided. (a) Who are the partners and how did each become one? (b) How is the remuneration matter decided?

Show the solution
  1. Mehta, Iyer and Khan subscribed their names to the incorporation document, so they became partners on incorporation (Section 22).
  2. Nair joined later, so Nair became a partner by and in accordance with the LLP agreement (Section 22).
  3. Mutual rights and duties are governed by the agreement (Section 23(1)).
  4. The agreement is silent on remuneration. In the absence of agreement on a matter, the First Schedule provisions apply (Section 23(4)).

Answer: Mehta, Iyer and Khan are partners as subscribers; Nair is a partner under the LLP agreement. The silent point on remuneration is decided by the First Schedule.

Example 2

Rao, a partner of Bharat Foods LLP, resigns on 1 June. The LLP agreement has no clause on cessation. Rao had contributed ₹4,00,000 as capital in full. The accumulated profits at 1 June were ₹3,00,000 and accumulated losses ₹1,00,000. Rao's profit-sharing ratio is 25%. (a) How must Rao resign? (b) What is Rao entitled to? (c) A supplier unaware of the resignation delivers goods on credit on 10 June. Is Rao treated as a partner?

Show the solution
  1. No agreement on cessation, so Rao must give written notice of not less than 30 days to the other partners (Section 24(1)).
  2. Entitlement is the capital actually contributed: ₹4,00,000 (Section 24(5)(a)).
  3. Net accumulated profit = ₹3,00,000 − ₹1,00,000 = ₹2,00,000.
  4. Rao's share = 25% × ₹2,00,000 = ₹50,000 (Section 24(5)(b)), assuming the profit-sharing ratio applies and the agreement does not provide otherwise.
  5. Total = ₹4,00,000 + ₹50,000 = ₹4,50,000.
  6. For the supplier: a former partner is regarded as a partner for persons dealing with the LLP unless that person has notice of cessation or notice has been delivered to the Registrar (Section 24(3)). The supplier had no notice; we are not told notice reached the Registrar.

Answer: Rao resigns by at least 30 days' written notice and is entitled to ₹4,50,000 (₹4,00,000 capital + ₹50,000 profit share). Unless notice was delivered to the Registrar, Rao is still regarded as a partner as regards the supplier.

Exam tips

  • Write the section number beside each rule: 22, 23, 24, 26, 7 and 9 cover most questions.
  • For 'partner as agent' answers, always add 'agent of the LLP, not of other partners'.
  • In cessation answers, list the three routes: agreement, 30 days' notice, and automatic events under Section 24(2).
  • In numerical exit questions, show capital, net accumulated profit, and the share separately, and mention 'unless the agreement provides otherwise'.
  • In MCQs, watch for traps with 'oral agreement', 'agent of other partners' or 'no notice needed to Registrar'.

Practice questions from Limited Liability Partnership Act, 2008

Partners, Rights and Duties and LLP Agreement in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Partners, Rights and Duties and LLP Agreement: frequently asked questions

Is a written LLP agreement compulsory?

The Act defines the LLP agreement as a written agreement. It governs mutual rights and duties, and it and any changes must be filed with the Registrar. If it is silent on a matter, the First Schedule applies.

How does a person become a partner in an LLP?

Subscribers to the incorporation document become partners on incorporation. Any other person becomes a partner by and in accordance with the LLP agreement.

Is a partner of an LLP the agent of the other partners?

No. Each partner is the agent of the LLP for its business, but not of the other partners.

When does a person cease to be an LLP partner?

By agreement, or by giving at least 30 days' written notice if there is no agreement. Cessation is also automatic on death or dissolution of the LLP, declaration of unsound mind by a competent court, or applying to be adjudged or being declared insolvent.

Does a former partner remain liable to outsiders?

For outsiders, the former partner is regarded as still a partner unless the outsider had notice of cessation or notice was delivered to the Registrar. Cessation also does not discharge obligations incurred while a partner.