Partner vs Designated Partner in an LLP: Key Differences

Introduction

The differences between a partner and a designated partner are minor, but understanding these terms is essential when registering in an LLP (Limited Liability Partnership). In general, a “partner” is any individual who contributes capital to a partnership firm and agrees to split profits and losses, liabilities, and benefits. A designated partner, on the other hand, is an individual designated by the other partners to be in charge of adhering to the LLP Act’s criteria. Let’s have a clear idea on “What is the difference between a Partner and a Designated Partner in an LLP?”

Partners in an LLP (Limited Liability Partnership)

A partner is defined in the context of a Limited liability Partnership as any person who joins the limited liability partnership in accordance with the limited liability partnership agreement. A partner must meet the following criteria:

• He needs to be of sound mind.
• He must not be an undischarged insolvent person.

Roles and Responsibilities of a Partner in an LLP

• Each partner is an agent of the LLP but not an agent of the other partners for the purposes of the LLP’s business.
• If an LLP or any of its partners acts with the intent to defraud the LLP’s creditors or any other person, or for any other fraudulent purpose, the LLP and the partners involved face unlimited liability.
• If a partner dies and the business continues in the same LLP, the continued use of that name or the deceased partner’s name as part of it does not make the deceased partner’s legal representative or estate liable for any act of the LLP done after his death.

Designated Partner in an LLP (Limited Liability Partnership)

The Limited Liability Partnership Act of 2008 introduced the concept of Designated Partners. These are similar to Private Limited Company directors. The shareholders of a Limited Liability Partnership may appoint two or more partners to serve as Designated Partners. Each LLP must have one Designated Partner who is an Indian citizen.

DPIN (Designated Partner Identification Number)

A Designated Partner Identification Number (DPIN) or Director Identification Number (DIN) is required for all Partners in an LLP. Both DPIN and Director Identification Number (DIN) are the same and can be used interchangeably, despite being referred to by different terms. A class 2 digital signature for the Designated Partner is required to obtain DPIN.

A Designated Partner role is available to all LLP partners. The incorporation document must name specific people as Partners during LLP registration. The LLP Agreement can provide for the review and rotation of the role of the DP, ensuring everyone’s participation. With the consent of the LLP’s other existing Partners, anyone can become a Designated Partner.

What is the difference between a Partner and Designated Partner in an LLP?

Wrapping Up

The basic difference between a partner is not responsible or liable for the payment of fines if an LLP fails to comply with the terms of the LLP Act. The LLP’s designated partners, on the other hand, have extended responsibility for the LLP’s penalties in the event of non-compliance with filing paperwork, returns, and account statements. For an LLP it is very crucial to understand the difference as it will help them in the smooth function of an LLP (Limited Liability Partnership).