Introduction
A Limited Liability Partnership (LLP) is a hybrid business structure that combines the features of a partnership and a company. The LLP is managed by its designated partners, who are responsible for running the day-to-day operations of the business. In this blog, we will discuss the designated partner’s role and their liabilities in the running of an LLP.
Role of Designated Partners
- Compliance with the LLP Agreement and the Law
The designated partners are responsible for ensuring that the LLP complies with its LLP agreement and the law. The LLP agreement is a legal document that governs the relationship between the partners and sets out the rules for the LLP’s management and operations. The designated partners must ensure that the LLP complies with the terms of the agreement and the law.
- Managing the Business of the LLP
The designated partners are responsible for managing the business of the LLP. They are responsible for making day-to-day decisions related to the business, such as signing contracts, making investments, and hiring employees. They are also responsible for preparing financial statements and ensuring that the LLP’s financial records are accurate and up-to-date.
- Filing Annual Returns and Financial Statements
The designated partners are responsible for filing the LLP’s annual returns and financial statements with the Registrar of Companies. The annual return provides information about the LLP’s partners, capital, and activities, while the financial statements provide information about the LLP’s financial performance.
- Maintaining Records and Registers
The designated partners are responsible for maintaining the LLP’s records and registers, such as the register of partners, register of charges, and minutes of meetings. These records are important for demonstrating the LLP’s compliance with the law and the LLP agreement.
- Liability for Breach of Duty
The designated partners are personally liable for any breach of duty or negligence in the running of the LLP. They must exercise their duties with care, skill, and diligence and act in the best interests of the LLP. If they breach their duties, they may be held personally liable for any losses suffered by the LLP or its partners.
Liabilities of Designated Partners
- Unlimited Liability for LLP’s Debts
The designated partners of an LLP have unlimited liability for the LLP’s debts. This means that if the LLP is unable to pay its debts, the designated partners may be required to contribute to the LLP’s assets to settle the debts.
- Liability for Breach of Duty
The designated partners are also personally liable for any breach of duty or negligence in the running of the LLP. If they breach their duties, they may be held personally liable for any losses suffered by the LLP or its partners.
- Liability for Criminal Offences
The designated partners may also be held liable for any criminal offences committed by the LLP. For example, if the LLP commits fraud or engages in illegal activities, the designated partners may be held personally liable for their involvement in the offence.
In conclusion:
The designated partners of an LLP play a crucial role in the running of the business. They are responsible for managing the business, ensuring compliance with the LLP agreement and the law, filing annual returns and financial statements, maintaining records and registers, and protecting the interests of the LLP and its partners. However, they also have significant liabilities, including unlimited liability for the LLP’s debts and personal liability for any breach of duty or negligence. Therefore, it is important for the designated partners to be knowledgeable about their roles and liabilities and to act with care, skill, and diligence in the running of the LLP