Types of LLP Agreements

LLP agreements should be customized and meet the requirement of all the partners without compromising on the objective and growth of LLP. Can you imagine one dress that can fit all? Similarly, one agreement may not fit all the partners into a satisfactory zone. Case. Following are the main types of LLP agreements.

Equal Rights LLP (1:1)

In such type of LLP, all partners contribute equal capital, time, and energy in the LLP. All receive the same remuneration and share the equal profit and loss. The decisions are mutually taken. All the partners have same rights and contribute equally to the management as well the business of the LLP.

Differential Rights LLP

In such type of LLP, Partners have a different amount of contribution in terms of capital, energy, and time. Hence the right to profit sharing, decision making, and managerial right differs. It can be classified into

• LLP Agreement wherein rights are in the ratio of contribution and profit sharing. The level of contribution may decide the level of profit sharing.
• LLP Agreement wherein rights are in the ratio of contribution only, but profit rights differ. Management rights may be equal or in some other ratio

Absolute Rights LLP

If, in LLP, there are only two partners and one person is appointed as the nominee or in only as the investor. The agreement is to be drafted in such a way that one person will get all the management as well as decision-making power.

Husband & Wife LLP

If Husband and wife are running LLP, then special agreement pertaining to tax liability can be made so as to minimize the family tax liability. Besides, they can choose any of the above-said types of LLP according to their convenience and need.

Differential Rights and Differential Powers LLP

In such type of LLP, partners hold different rights and powers. Some may be just investing while other may be holding managerial responsibilities. In order to avoid miscommunication and conflict, the rights and power of partners must be well defined and agreed on.

Partner Managed LLP

In such type of LLP, there are multiple partners. It is same as differential rights and power LLP where some partners are nominal or investor while others are holding; administrative/management/operational decision-making powers.

Board Managed LLP

In such type of LLP, management is done by forming the board /committee of partners similar to a board of director in the company. Overall control rest in the hands of all partners whereas day to day managerial and operational, decision-making power rest in the hand of board/committee of partners.

Manager Managed LLP

In such type of LLP, partners appoint the manager and give him specific powers related to administration, management, operational. In this multi-partnership LLP, the role of the partner is as investor and do not have any decision making right on day to day activities of the company