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?”
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:
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.
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.
|
Partner |
Designated Partner |
Meaning |
Each member of a commercial partnership formed by two or more people is referred to as a partner. |
A designated partner is any partner who is designated as such in the incorporation document at the time of LLP registration. |
Need for DPIN |
For becoming a partner there is no need for DPIN |
Each must obtain a DPIN (Designated Partner Identification Number). |
Eligibility |
Any individual or organisation can become a partner. |
Individuals can be chosen or appointed as partners. |
Rights and responsibilities |
The partnership deed outlines the partners’ obligations, rights, and liabilities in the case of a general partnership; the LLP agreement does so in the case of a limited liability partnership. |
The LLP Agreement details the roles, responsibilities, and obligations of the partners. |
Context and Act |
General Partnership and Limited Liability Partnership. Partners can act as a director and agent. |
Only appointed in an LLP, and these only act as an agent. |
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).
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