LLP Agreement Format in India: Clauses, Drafting & Form 3 Filing

Introduction

LLP agreement is a legal document that acts as the basis for a Limited Liability Partnership (LLP) in India. Under Section 23, a custom-drafted LLP agreement is not mandatory to run an LLP in India. If the agreement is missing, it is governed by the First Schedule of the Limited Liability Partnership Act, 2008, which manages its internal operations. The agreement is generally not mandatory when partners accept the default rules. Further, a Limited Liability Partnership agreement is a written formal contract that governs partners’ rights, duties, capital, profit sharing, disputes, management, and exit rules.

Without the LLP agreement, a Limited Liability Partnership faces legal and operational limitations; therefore, it must be drafted within 30 days of incorporation. Failure to file Form 3 (LLP details) results in a daily fine of ₹100 or ₹200 per day with no upper ceiling . In this comprehensive guide, you will learn how you can draft an LLP agreement with an accurate format and how to prepare it with valid clauses. 

What is an LLP Agreement?

An LLP agreement, or Limited Liability Partnership Agreement, is a legally binding written contract between the LLP and its partners under Section 23 of the Limited Liability Partnership Act, 2008. It acts as an internal constitution for an LLP in India that determines how a business is run, how the partners will make decisions, and the rules to manage financial matters. On the other hand, 

The key features of an agreement include:

• Written Legal Contract: It is a legally valid document that specifies the contract between all parties and the LLP itself.  
• Customization: Partners of an LLP can tailor the internal rules in the agreement according to their business requirements. 
• Limited Liability Clarification: Partners’ liability is strictly limited to their agreed contribution. 
• Designated Partner’s Roles: It differentiates between general partners and designated partners clearly. It describes the role of designated partners with regard to compliance, statutory filing, and accountability. 

LLP Agreement Format: Complete Structure

The agreement must be filed with the Registrar in "Form 3" within 30 days of incorporation and should be executed on stamp paper. Further, if any changes are made to the internal rules of the LLP, they must also be updated in the agreement. 

LIMITED LIABILITY PARTNERSHIP AGREEMENT

OF [LLP NAME] LLP (LLPIN: [LLPIN, or "To be allotted" if filed with incorporation])

This Limited Liability Partnership Agreement ("Agreement") is made at [Place] on this [Day] day of [Month], [Year].

PARTIES

• Partner 1 Name: LLP name, LLPIN, registered office, partner names, addresses, PAN, and DPIN where applicable
• Partner 2 Name: Similar information as above
• Partner nth Name: Similar information as above

RECITALS

In this section, you need to mention the date, purpose, and background of the LLP. The partners should agree to the following conditions: 

A. Under the Limited Liability Partnership Act, 2008, the partners intend to carry out the business together with the aim of earning profit from the LLP. 

B. According to this agreement, the partners will contribute capital and share profits and losses of the LLP.

C. Record the terms in writing by the partners. This Agreement is effective from [Date of Commencement / Date of Incorporation].

NOW THIS AGREEMENT WITNESSETH AS FOLLOWS: 

Clause 1: Name and Registered Office

Under this section, you need to mention the LLP's legal identity and the address to which official notices are sent. The location can be a registered office or any other place decided by the LLP's partners. However, if any changes occur, it is required to file Form 15 within 30 days of the changes with the Registrar. If any branch office is opened in India or abroad, it shall be mentioned with the proper location as the partners decide. 

Clause 2: Business Objects and Permitted Activities

This clause covers what the LLP will and will not do. Start with the LLP's main business. You need to mention the business's main activity, with additional activities, if any. The LLP shall not perform any business activity that is restricted by law or requires a license for it. Prohibited activities can only be conducted after approval is obtained from the authority.

Clause 3: Term and Commencement

Covers the lifetime of the Limited Liability Partnership (e.g., when it begins and how long it lasts). The operations of an LLP continue until it is wound up under Section 16 or required to close by the Act. As the legal framework of an LLP provides perpetual succession, any changes in partners won'taffect the LLP's existence. The operations will continue unless closed by law. 

Clause 4: Capital Contribution

In this section, the LLP is required to mention its partners' contributions. It means how much each partner invests and in what form, like cash/kind/ other. Write the total contribution of the two designated partners in Rs and in words in the columns.

Clause 5: Profit-Sharing and Loss-Sharing Ratio 

It covers how the LLP divides its profits and losses with its partners. Required to mention the ratio of profit-sharing and loss-sharing after meeting all expenses, taxes, and agreed payments to Partners. Furthermore, the profit shall be determined at the end of the financial year. Meanwhile, the profit-loss ratio can only be changed by written amendment under Clause 15. 

Clause 6: Rights, Duties, Powers, and Restrictions of Partners

It covers what each partner must do or not do. Highlights their duties, powers, and rights with restrictions. Taking part in the LLP's management is mandatory as specified in clause 7. Its partners have the right to inspect the books and records and receive true and full information on the LLP's affairs. Duties for each partners includes: 

(a) act in good faith and in the interest of the LLP;

(b) devote [full time / such time as is needed] to the LLP's business;

(c) account to the LLP for any benefit derived from its business or property without consent;

(d) comply with the Act, the Rules, and this Agreement.

Agency: For the LLP, each partner is an agent, not of other partners. In a Limited Liability Partnership, the partners are not personally liable for legal debts or obligations, except for their own wrongful acts. 

Restrictions: Restrictions are imposed on the partners, and they cannot perform the following activities without written consent:

1. borrow or lend on behalf of the LLP above the specific amount;
2. give guarantees or mortgage LLP assets; enter into contracts above the specific amount.
3. assign, transfer, or pledge their share in the LLP
4. Engage in any business competing with the LLP (see Clause 13)
5. Hire or dismiss senior employees 

Clause 7: Management, Decision-Making, Voting, Quorum and Meetings

Covers who is responsible for running the LLP and how decisions are made. The important sectors covered are:

1. Statutory Matters: The business is managed by the partners who act as the designated partners.
2. Ordinary Matters: Decided by a majority of Partners by [number / profit-share / capital] vote. If any ordinary matters arise, then the decision is taken by a majority of partners by vote. This vote is decided by the number/profit share and capital.
3. Reserved Matters: Need the consent of (all Partners / Partners holding a specific percentage of equity): For change of business, admission or expulsion of a Partner, change of ratio, amendment of this Agreement, sale of substantially all assets, borrowing a specific amount, and winding up, requires the consent of all partners or partners holding a specific percentage. 
4. Meetings: Holding a meeting is necessary once a quarter or twice a year at the registered office (or can be conducted digitally). 
5. Quorum: Quorum is [two Partners / Partners holding a specific percentage of the voting power]. 
6. Casting vote: In the event of a tie, the Chairperson shall have a casting vote. 
7. Minutes of Meeting: It is mandatory to record minutes of every meeting, which must be signed by the chairperson and kept with the LLP's records. If any decisions are taken, they must be in writing and signed by a majority of partners. 

Clause  8: Designated Partners

It covers the Partners' responsibility for legal compliance. An LLP must have at least two designated partners who are individuals (or individual nominees of a corporate body), and one of them shall be a resident of India (stay in India for 120 days during the financial year). This clause highlights the designated partner's name, DPIN, including appointment and removal. Also covers what will be the responsibilities of the designated partners will be, and what the consequences are for statutory defaults. 

Clause 9: Remuneration, Drawings, Interest on Capital and Reimbursement

It covers the payments to Partners other than profit share. It also covers the remuneration, interest on capital, drawings and reimbursement.

Clause 10: Banking, Accounts, Records, Audits and Financial Controls

This clause covers how money is handled and recorded. Upon LLP incorporation, it is required to open a current bank account, maintain the proper books of account, have the accounts audited by chartered accountants, maintain records, and be subject to inspection by every partners. The LLP is required to follow the financial year calendar from 1 April to 31 March. 

Clause 11: Admission of a New Partner

Covers how a new partner joins. To appoint a new partner, permission shall first be obtained from all existing partners with written consent. The new partner shall also sign the LLP agreement. Within 30 days of a new partner joining, retiring, or any changes, the LLP is required to file Form 4. A new partner must obtain a DPIN. 

Clause 12: Retirement, Resignation, Death, Insolvency, Expulsion and Exit Valuation

Covers the process of a partner's retirement and what they are paid. Under Section 24(1) of the Act, if LLP agreement didn't specify the timeline for resignation, the partner required to submit a default statutory notice period to ressign before 30 days. As the agreement is a private contract, the partners can increase the notice period (usually 90 days) after mutual agreement. This clause also covers terms for a partner's death, insolvency, or incapacity, expulsion, and valuation of the exit share. 

Clause 13: Non-Compete, Confidentiality, Intellectual Property and Indemnity

Covers how the LLP's business and information will be safeguarded. In detail, it covers the post-exit restrictions on the partners not using the personal information of the LLP, its clients, and its business for their own benefit. Also highlights the rules for intellectual property and indemnity. 

Clause 14: Dispute Resolution, Arbitration, Seat, Governing Law, and Jurisdiction

Covers how disputes are resolved between the partners. If any dispute arises, the parties shall settle it by good-faith discussion within 30 days of written notice; if not resolved, then referred to arbitration under the "Arbitration and Conciliation Act, 1996". 

Clause 15: Amendment Procedure and Supplementary Agreement

This clause covers how the changes can be made in this agreement. Well, this agreement can be changed only after a written resolution is passed and signed by all partners or those holding a specific percentage share. File Form 3 with the Registrar within 30 days of any change or amendment. 

Clause 16: Winding Up and Dissolution

It covers how the LLP will be closed. The LLP can be wound up voluntarily only after the partners' consent or by order of the Tribunal under the Act. During winding up, the assets must be applied in the order as specified in the agreement. 

Clause 17: Miscellaneous, Notices, Severability, and Entire Agreement

It covers some common legal terms like how the notices would be served (must be in writing and delivered by hand, registered post, courier, or email to the addresses mentioned in the annexure. If any of its provisions are declared invalid, it does not include invalidity of its other provisions. This clause also elaborates upon the matter of total agreement, the matter of defaults, no waiver, and counterparts.

Signature Block

In this table, it is required to mention all partners’ names, their signatures, and dates. Also cover witnesses' names, addresses, and signatures, including the place and date. 

Annexure I: Partner Details

Mention the partner’s name, father’s/spouse’s name, address, PAN, DPIN if any, designated partner’s name, and email/ contact number. 

Annexure II: Capital Contribution Schedule

Mention partner name, their contribution in ₹ and in words, including form (e.g cash/kind), due date, and % of total capital. 

Annexure III: Profit-Sharing Schedule

Two designated partners, with their profit-sharing and loss-sharing ratio, working/sleeping partner, remuneration in ₹, and interest on capital.

Disclaimer: This format is only for general knowledge and does not provide any legal advice. Filing forms, fees, thresholds, and stamp duty change from time to time; therefore, confirm every detail on the MCA portal and with a professional before implementation.

Complete Process to Prepare the LLP Agreement

Under Section 23 of the LLP Act, 2008, filing and preparing the LLP agreement is crucial, as it works as the basis for business operations. It highlights all core terms in detail so that no disputes are created in the future. To draft an LLP agreement, follow these steps:

Step 1: Collect Details

Prepare all required information/ documents such as LLP incorporation details, registered office proof, LLPIN, partners' and designated partners' details.

Step 2: Member's Decision

Affirm partners’ choices regarding investment amount, profit division, duties, payment, voting, exit, and conflict resolution.

Step 3: Prepare LLP Agreement Format

Either choose or customise the LLP agreement format, but must ensure that it includes all mandatory and business-specific clauses with proper headings.

Step 4: Review Draft

Before the final execution, the draft must be reviewed by all partners, and any disagreements must be resolved.

Step 5: Print Agreement

Once the agreement is approved by all partners, print or e-stamp it on non-judicial stamp paper. The cost of stamp paper varies state to state.

Step 6: Partner’s Signature & Witness Details

Get the signatures of all partners, including adding the details of the witness where required. Perform the notarisation if locally required.

Step 7: Scan Agreement and File Form 3

Within 30 days of LLP agreement incorporation, file LLP Form 3 on the MCA V3 portal and attach the agreement. Signatures of all designated partners with their DSC are required. Pay the applicable fees and save the SRN/acknowledgement number. 

Process of LLP Form 3 Filing on MCA

Upon filing preparation of the LLP agreement for filing, it is mandatory to file Form 3 with the Registrar on the MCA V3 portal online. Follow these steps to file the form:

• Log in to the MCA V3 portal and navigate to its credentials. 
• To open the LLP Form 3, click on “Form 3 - Information for LLP agreement and changes”. 
• Use your user ID (CIN/LLPIN/FCRN for Company/LLP and Email ID for other users) and password to log in to the page. 
• Mention details like agreement date, partner contribution, profit-sharing arrangements, and required particulars. 
• Upload the stamped and executed LLP agreement format PDF, and attach the DSC of a designated partner.  
• Pay the prescribed filing fee. This fee depends on the capital contribution of the LLP. 
• Submit the form on the MCA portal, save the SRN, and download the acknowledgement.

Deadline, Documents and Penalties

Being active with the form filing deadline and required documents is crucial to avoid possible penalties.

•  Deadline: It is mandatory for an LLP to file Form 3 within 30 days of incorporation. However, if any modifications or changes are made to the LLP agreement, file Form 3 within 30 days of any changes. 
• Documents: Prepare the required documents, such as the LLP agreement in PDF format must be stamped, the designated partner’s DSC, LLPIN, partner’s details, capital-contribution details, and the stamp-duty payment proof. 
• Consequence of delay: Delay in filing attracts an additional late fee/penalty, e.g., historically ₹100 or ₹200. Before filing, always check the applicable amount and calculation against MCA rules. 

Stamp Duty on LLP Agreement

As the stamp duty is governed by individual state legislation in India, the applicable charges significantly vary depending on the specific state where the LLP is registered. It directly relates to the LLP’s total contribution, and the amount is paid through stamp paper or e-stamping. Meanwhile, the stamp duty must be paid before or at the time of LLP agreement signing.

Stamp Duty Rates Across Major States 

Here are the stamp duty charges across major states:

Conclusion

An LLP agreement draft works as the structural backbone for a Limited Liability Partnership in India. A well-structured agreement is far better for satisfying the regulatory obligations. By clearly defining the capital contribution, management control, profit distribution, exit mechanisms, and dispute resolution processes, this tailored agreement protects both the interests of individual partners and the long-term stability of the firm.

In case of failure to file Form 3 after drafting the LLP agreement, it may trigger legal action or statutory penalties. Avoid the hefty statutory fines with JustStart experts, helps throughout the LLP agreement drafting  procedure. 

Frequently Asked Questions

Q1. Is an LLP agreement mandatory in India?

Ans. Drafting the LLP agreement in India is a legal requirement under Section 23 of the Limited Liability Partnership (LLP) Act, 2008. But it is not strictly mandatory to draft an agreement for a Limited Liability Partnership, as it is governed by the First Schedule of the Limited Liability Partnership Act, 2008. However, it is still required for the LLP to file Form 3. 

Q2. Can I prepare the LLP agreement draft myself? 

Ans. Yes, you can draft or prepare the LLP agreement for your Limited Liability Partnership, as there is no legal requirement to appoint a professional. However, it can be risky if you miss any important operational rules or if it is poorly written. 

Q3.    On what stamp paper should an LLP agreement be executed?

Ans. It is mandatory for an LLP to execute the LLP agreement on non-judicial stamp paper. 

Q4.   Is notarisation required for an LLP agreement?

Ans. No, under the Limited Liability Partnership Act, 2008, it is not legally mandatory to notarize the LLP agreement to register with the RoC on the MCA portal.

Q5. What is LLP Form 4 in India?

Ans. LLP Form 4 is a statutory e-form used to notify the RoC via the MCA portal about any changes to the partners' or designated partners' information.

Q6.   When should Form 3 be filed after LLP incorporation?

Ans. The LLP agreement Form 3 must be filed within 30 days with the Registrar of Companies after the incorporation of the Limited Liability Partnership.