Difference Between Partner and Designated Partner in LLP

Are you looking to start a limited liability partnership but not able to understand the difference between partner and designated partner in a LLP. In this guide we will describe the difference between them in a easy to understand way.

The limited liability partnership (LLP) is a more common business structure in India for startups because it has less liability and fewer compliance requirements than a private limited company or public limited company. In the LLP, there are partners and designated partners rather than shareholders and directors.

The partners and selected partners invest money in the LLP, run the company, and occupy positions similar to directors in other companies. However, there is only a slight difference between partner and designated partner; but they behave differently in the LLP; they hold various positions and play multiple functions, and the differences are as follows:

What is a partner in LLP?

Any person or organization who joins a partnership business as a member and shares earnings and losses according to a predetermined ratio is referred to as a partner. So, a partner owns a portion of the partnership firm.

In addition, the partners must conduct business to maximize their mutual benefit, treat one another justly and fairly, and provide accurate financial information about any relevant factors that could impact any partners.

What is the designated partner in LLP?

The concept of a Designated Partner was first introduced by the Limited Liability Partnership Act of 2008. A designated partner performs the same duties as a company’s directors but with additional rights and benefits.

A DPIN, or Designated Partner Identification Number, is required for each LLP’s Designated Partners. The document must list at least two people as designated partners at registration. In the lack of additional information, any partner will be regarded as an established partner if their name appears first in the statement of partners in the declaration.

Difference between partner and designated partner

Below are some key difference between partner and designated partner in LLP. In a limited liability partnership, both partners, including the designated partner, are accountable for any actions, matters, and tasks that must be completed (LLP). The duties of designated partners in a Limited Liability Partnership (LLP) are the same as those of partners.

In addition, they carry out the same duties as directors in companies. According to the LLP agreement, they are controlled by reciprocal rights and obligations. But there are specific difference between partner and designated partner in LLP for their roles and definitions, and these are as follows –

• In general partnerships, the term “partner” refers to all participants, whereas “designated partner” is used in limited liability partnerships.
• A partnership deed typically outlines a partner’s obligations, rights, and liabilities, whereas an LLP agreement specifies a designated partner’s duties, rights, and responsibilities.
• A partner’s liability to third parties is unlimited. It includes his personal property, while a designated partner’s liability is limited to the capital they contributed or as otherwise specified in the LLP Agreement.
• All administration and execution of the LLP’s obligations, including compliance with rules such as submitting documents, returns, and statements as required by the LLP Act, are entirely under the purview of the Designated Partners. Partners in an LLP, however, are merely obligated to contribute to the LLP and are not held liable for any such activities.
• The Partnership Deed and the LLP Agreement will determine how much each party is responsible for any penalties for violating the requirements.
• The competent authority does not need a partner to obtain an identifying number. In contrast, the chosen partners must get a DPIN (Designated Partner Identification Number).

Conclusion

We hope you are now understand the difference between partner and designated partner in LLP along with their meaning and significance.

Generally speaking, a member of a partnership business is referred to as a “partner” in legal terminology. However, a designated partner is the person who has been given the go-ahead from the other partners to fill the function and is subject to review and rotation.

Since there is only a slight difference between partner and designated partner, caution must be taken when incorporating and including a person in a limited liability partnership.