LLP Agreement Under Section 23, LLP Act 2008

An LLP agreement is the written contract between the partners of a limited liability partnership, or between the LLP and its partners, that determines their mutual rights and duties. The definition comes straight from Section 2(1)(o) of the LLP Act, 2008, and it is the document that does for an LLP what the articles of association do for a company. It is the internal rulebook: who contributes how much capital, how profits and losses are divided, who can sign cheques and bind the firm, and what happens when a partner walks in or walks out.

People often confuse it with a partnership deed, but the two belong to different statutes and different worlds. A partnership deed governs an old-style firm under the Indian Partnership Act, 1932, where partners carry unlimited personal liability for the firm's debts. An LLP agreement governs a body corporate with limited liability, a separate legal personality and perpetual succession, registered with the Registrar of Companies rather than the Registrar of Firms. The capital you commit in an LLP, not your personal assets, is what stands behind the firm's obligations.

The agreement is also distinct from the incorporation papers themselves. The LLP is created the moment the Registrar issues the Certificate of Incorporation. The agreement comes after that, which is why it must be filed as a separate step. You can review the LLP and partnership documents in our Indian business section to see how the incorporation set and the agreement fit together.

The governing statute is the Limited Liability Partnership Act, 2008, read with the LLP Rules, 2009. The central provision is Section 23, which makes the agreement the document that governs the mutual rights and duties of the partners and of the LLP towards them. Section 23(2) requires that the agreement, and any later change to it, be filed with the Registrar in the prescribed form. That form is e-Form 3, and under Rule 21 of the LLP Rules, 2009 it must be filed within thirty days of incorporation, with a copy of the executed agreement attached. The same thirty-day window applies again every time the partners amend the agreement, counted from the date the change is ratified by all partners.

Two consequences flow from this that founders underestimate. First, if you never file an agreement, the LLP does not fall into a vacuum: the default rules in the First Schedule automatically apply. Those defaults share profits equally among partners regardless of capital, give every partner an equal say in management and deny any partner a salary. For a firm where one partner put in most of the money and another runs the operations day to day, that result is rarely what anyone intended. Second, the agreement carries no legal weight as a registered instrument until it is properly stamped and filed; an unstamped agreement is poor evidence in court.

Execution has its own formalities. The agreement must be printed on non-judicial stamp paper of the correct value, signed by all partners and notarised. The stamp duty is not a token amount and it varies by state, a point we return to below. The authority for all of this, including the form of the agreement and the registration mechanism, is set out in the Act itself, available in full on the Ministry of Corporate Affairs official portal for LLP law. The thirty-day deadline is strict and there is no exemption based on the size of the LLP, its turnover or its number of partners.

The classic trigger is a fresh incorporation. You have just received the Certificate of Incorporation, the thirty-day clock has started, and you need a stamped, signed agreement to attach to e-Form 3. This is the single most common situation and the one with the hardest deadline. A second trigger is professional firms organising themselves as an LLP: chartered accountants, company secretaries, architects, consultants and law-adjacent advisory practices choose the LLP precisely because it pairs limited liability with the freedom to draft their own internal terms, and the agreement is where those terms live.

A third scenario is the admission of a new partner into an existing LLP. Bringing in a partner changes the capital structure and the profit-sharing ratio, so the agreement has to be amended and re-filed within thirty days of the change being ratified. The mirror image, the retirement, resignation or death of a partner, raises the same need: the exit terms, the settlement of the outgoing partner's capital account and the redistribution of their share all have to be documented and notified to the Registrar. Our shareholders and partner governance templates for Indian companies cover the related governance paperwork.

Two edge cases are worth flagging because they catch people out. When a body corporate, a company or another LLP, joins as a partner, a 2023 amendment requires additional corporate identification details in the filing, so a one-line clause naming the entity is not enough. And on the conversion of a private company into an LLP, the new agreement is treated as a fresh instrument that attracts stamp duty in its own right, sometimes alongside duty on the transfer of assets.

• The capital contribution clause records exactly what each partner brings in, in money or in kind, written in both words and figures, and states whether contributions earn interest. The draft defaults to twelve per cent simple interest per annum on capital, which you can adjust; without this clause the First Schedule gives no interest at all.
• The profit and loss sharing ratio is set out partner by partner and must total one hundred per cent. This is the clause the First Schedule would otherwise override by splitting everything equally, so getting it right is the whole point of having an agreement where the money and the work are unevenly matched.
• The management and decision-making clause identifies the designated partners, the matters that need unanimous consent versus a simple majority, and who has authority to bind the LLP to third parties. It keeps day-to-day signing power separate from major decisions like borrowing or admitting partners.
• The admission, retirement and expulsion clause lays down how a new partner is brought in, the notice an outgoing partner must give, how their capital account is settled and the grounds on which a partner can be expelled. Each event is the kind that triggers a fresh Form 3 filing.
• The dispute resolution clause routes disagreements through arbitration under the Arbitration and Conciliation Act, 1996 rather than straight to litigation, naming the seat and the language, which spares partners a public courtroom fight over internal matters.
• The dissolution and winding-up clause sets the events that end the LLP and the order in which assets are applied to liabilities and then to partners' capital, closing the gaps the statutory defaults leave open.

Stamp duty on an LLP agreement is a state subject in India, governed by the State Stamp Act where the LLP's registered office sits, and it is calculated chiefly on the total capital contribution of the partners. The same agreement can cost very different amounts depending on the state of registration, so the figure must be checked against the relevant State Stamp Act before the document is printed.

Maharashtra sits at the higher end. Duty is charged on the capital contribution with a ceiling that runs into the tens of thousands of rupees for larger firms, and the state has moved its stamp payment almost entirely online through the GRAS (Government Receipt Accounting System) and e-SBTR mechanisms rather than paper stamp paper. An LLP registered in Mumbai should budget accordingly and pay through the state's own gateway rather than assuming a flat slab.

Delhi applies duty as a percentage of capital contribution subject to its own minimum and ceiling under the Indian Stamp Act as applied to the National Capital Territory, and e-stamping through SHCIL is mandatory for most denominations. Karnataka likewise mandates SHCIL e-stamping and charges on capital subject to a floor, so a Bengaluru LLP cannot use plain franking for higher values. Tamil Nadu uses a percentage-of-capital model with its own minimum.

Several states, including Bihar and Uttar Pradesh, use fixed slab rates rather than a straight percentage, which means a small firm can face a flat charge that feels disproportionate to its tiny capital. A handful of states extend concessions to women entrepreneurs, startups or low-capital LLPs, but these depend on a state notification and should never be assumed. The practical rule is simple: confirm the rate with the local Sub-Registrar or the State Revenue Department before execution, because an under-stamped agreement is treated as inadequately stamped and is weak evidence in any dispute.

You begin by entering the LLP's name exactly as it appears on the Certificate of Incorporation, its LLPIN and the registered office address, since these must match the Form 3 filing precisely. From there the draft asks for each partner's full name, father's name and residential address, which you should cross-check against PAN cards or passports because a spelling mismatch is a common reason for rejection. Next you set the capital contribution for each partner in both words and figures, and the form carries those figures into the profit-sharing table, where you confirm the percentages total one hundred.

The agreement then walks you through the management terms: who the designated partners are, which decisions need unanimity and the interest rate on capital, which defaults to twelve per cent and can be changed. Once the fields are complete you download the agreement in Word and PDF, print it on non-judicial stamp paper of the value applicable in your state, have all partners sign and get it notarised. The final step happens on the MCA portal, not here: a designated partner files the signed agreement in e-Form 3 using a valid digital signature, within the thirty-day window. Our Indian business and incorporation document library keeps the related resolutions in one place.

The mistake that costs real money is missing the thirty-day filing deadline. Form 3 attracts a late fee of around one to two hundred rupees per day with no upper cap, so an agreement filed months late can run up a penalty that dwarfs the stamp duty, and the LLP is marked non-compliant until it is sorted, which can stall loans and approvals. Almost as common is printing the agreement on stamp paper of the wrong value, because the partners assumed a flat rate instead of checking their state's slab; an under-stamped instrument is treated as defectively stamped and is hard to rely on in court. A third error is leaving the profit-sharing or capital clauses vague or letting the percentages fail to total one hundred, which invites the First Schedule defaults to fill the gap and override what the partners actually agreed.

Founders also forget that the agreement and the incorporation are two separate acts, and that every later change to the agreement, a new partner, a revised ratio, a shift in capital, needs its own Form 3 within thirty days of ratification. Skipping notarisation is another quiet risk, since a notarised agreement carries far more weight if it is ever produced before a tribunal. Finally, when a company or another LLP comes in as a partner, the post-2023 requirement for corporate partner details is easy to overlook. If you are weighing the LLP against a company structure, our private limited incorporation papers for India set out the alternative. For broader commercial drafting, the contract templates built for Indian law are a useful companion.