LLP Form 3: filing the LLP agreement and its changes with the Registrar

Why Form 3 matters

The LLP agreement governs profit sharing, contribution, admission and exit of partners, decision-making and dispute resolution. Section 23 of the LLP Act requires the agreement and every change in it to be filed with the Registrar.

If no agreement is filed, the default provisions in the First Schedule of the Act apply, which may not reflect what the partners actually agreed, for example equal profit sharing.

What should an LLP agreement cover?

A good agreement goes beyond the statutory minimum. It should state each partner's contribution and how further contribution will be called, the profit and loss sharing ratio, salaries or interest payable to partners, powers of designated partners, and how decisions are taken.

It should also deal with admission of new partners, retirement, death, expulsion, valuation of an outgoing partner's share, non-compete terms, and dispute resolution, such as arbitration. Partners who skip these clauses often find themselves governed by the First Schedule when a dispute arises.

When is Form 3 filed?

Form 3 is due within 30 days of incorporation for the initial agreement. It is filed again within 30 days whenever the agreement changes, such as a change in profit-sharing ratio, contribution, business objects or admission of a new partner. A change in partners is usually reported through Form 4 as well, so the two forms are often filed together.

Fees and stamp duty

The MCA filing fee is linked to the LLP's contribution under Annexure A. Stamp duty on the agreement is a state levy and must be paid before execution, usually through e-stamp paper or the state's e-stamping system. Amounts differ widely between states and sometimes depend on contribution, so check your state's Stamp Act.

Late filing attracts additional fee as a multiple of the normal fee, rising with the delay. Because the multiple applies to the normal fee, larger LLPs with higher contribution pay more for the same delay than small LLPs.

Documents needed

The agreement should be signed by all partners and witnessed. Its contents, such as names, contribution and registered office, must match the incorporation records and Form 4 filings. Keep the original stamped agreement safely, as banks and auditors often ask to see it.

• Executed LLP agreement on stamp paper of the correct value, signed by all partners
• Supplementary agreement, where an existing agreement is changed
• Partners' resolution or consent approving the change
• DSC of a designated partner and of the certifying professional

Common mistakes and consequences

Mistakes include stamping in the wrong state, under-stamping, executing the agreement before incorporation without ratifying it afterwards, and contribution figures that do not match FiLLiP. Missing the 30-day window is common and expensive for an agreement filed years later.

Apart from additional fee, the LLP and its designated partners can face penalties under the Act for not filing information required with the Registrar. More practically, banks, investors and tax authorities often ask for a filed agreement.

Step by step

1. 1Draft the agreement

   Cover contribution, profit share, management, admission, exit and disputes.

2. 2Pay stamp duty

   Buy e-stamp paper of the correct value for your state.

3. 3Execute

   All partners sign the agreement with witnesses.

4. 4Fill Form 3

   Enter agreement details and attach the executed agreement on MCA V3.

5. 5Certify and pay

   Designated partner signs, a practising professional certifies, then pay the fee.