Difference Between Partner And Designated Partner

When setting up a business in India, many entrepreneurs choose the Limited Liability Partnership (LLP) structure because it blends the flexibility of a partnership with the limited liability feature of a company. However, within an LLP, not all partners have the same legal responsibilities. While some focus on managing the business and sharing profits, others, called Designated Partners, take on official compliance and regulatory duties. Though the two roles seem similar, their legal standing, rights, and liabilities differ significantly. This article clearly explains the difference between a Partner and a Designated Partner, their responsibilities under the LLP Act, 2008, and how each contributes to the functioning of an LLP.

We will cover:

• Meaning of Partner and Designated Partner
• Legal framework under the LLP Act, 2008
• Appointment, eligibility, and roles
• The rights and liabilities of both
• Compliance duties and penalties
• Comparison table

Who is a Partner in an LLP?

A Partner in an LLP is any individual or body corporate who has joined the business by mutual agreement and contributes to the functioning of the LLP - financially, strategically, or through expertise.

Key Characteristics of a Partner

• Partners collectively own and manage the LLP.
• They share profits and losses as per the LLP agreement.
• Their liability is limited to their capital contribution.
• They can participate in decision-making, unless otherwise restricted.
• They represent the LLP in business dealings and contracts.

Read Next : Partners and Their Relationship in LLP: A Complete Guide

Legal Provision

Under Section 5 of the Limited Liability Partnership Act, 2008, any individual or body corporate can become a partner in an LLP unless disqualified by law.

Rights of Partners

• Right to access books of accounts and financial records.
• Right to participate in management decisions.
• Right to share profits and receive remuneration (if specified).
• Right to inspect and audit the accounts of the LLP.

Liabilities of Partners

• Liability is limited to the amount contributed to the LLP.
• They are not personally liable for other partners’ misconduct or negligence.
• However, they can be held responsible for fraudulent acts committed with their consent.

Also Read : Convert a Proprietorship to an LLP

Who is a Designated Partner?

A Designated Partner is a partner who is specifically identified as such in the incorporation document or appointed later by mutual agreement.
They are essentially the compliance officers of the LLP- responsible for ensuring that all legal, tax, and regulatory obligations are met.

Legal Provision

Sections 7 and 8 of the LLP Act, 2008 state that:

• Every LLP must have at least two designated partners.
• At least one designated partner must be a resident of India (residing in India for 120 days or more in a financial year).
• Every designated partner must obtain a Designated Partner Identification Number (DPIN).

Key Functions of Designated Partners

• Ensuring timely filing of annual returns, income tax, and other statutory documents.
• Maintaining accurate and up-to-date books of accounts.
• Acting as the official signatory for ROC filings and statements.
• Ensuring compliance with the LLP Act, 2008, and other applicable laws.
• Coordinating with regulatory authorities like the Ministry of Corporate Affairs (MCA).

Responsibilities and Liabilities of Designated Partners

Designated Partners carry greater accountability than ordinary partners. They act as the face of the LLP before the law and are answerable for all compliance failures.

Major Responsibilities

1. Filing the Statement of Account and Solvency (Form 8) annually.
2. Filing the Annual Return (Form 11) within 60 days of the financial year-end.
3. Maintaining proper financial records and registers.
4. Ensuring that all partners’ details are kept current with the Registrar.
5. Providing certification and authentication for legal filings.

Penalties for Non-Compliance

If an LLP fails to comply with statutory requirements - such as filing annual returns or statements, designated partners can be personally fined. Penalties may range from ₹10,000 to ₹5,00,000 depending on the nature and duration of default.

Eligibility and Appointment Process

Eligibility Criteria

To qualify as a Designated Partner, a person must:

• Be an individual (not a company or firm).
• Already be a partner in the LLP.
• Be a resident of India (for at least one designated partner).
• Obtain a Designated Partner Identification Number (DPIN).

Appointment Process

1. Obtain DPIN through the MCA portal.
2. Give consent to act as a Designated Partner (Form 9).
3. Mention the appointment in the LLP Agreement or through a supplementary agreement.
4. File the appointment or change with the Registrar in Form 4 within 30 days.

Comparison Table: Partner vs Designated Partner

Why Designated Partners Are Crucial?

Designated Partners are the compliance backbone of an LLP. While other partners drive business growth and client relationships, designated partners ensure that the LLP meets all legal and regulatory obligations on time. They handle filings, maintain records, and act as the official point of contact with government authorities. Their presence adds credibility and accountability, ensuring that the LLP remains transparent, well-governed, and free from penalties or legal complications. Moreover, by monitoring deadlines, financial statements, and statutory disclosures, designated partners help build investor confidence and sustain the LLP’s good standing. Their proactive role not only keeps the firm compliant but also safeguards its reputation and continuity in the long run.

Read Next : LLP closure procedure in India

Practical Example

Imagine two individuals, Ravi and Meena, form an LLP called RM Legal Solutions LLP. Both contribute ₹5 lakh each. Ravi handles operations and client relationships, while Meena ensures that all MCA filings, annual returns, and tax compliances are done on time.
In this setup:

• Ravi is a Partner, actively managing the business.
• Meena is a Designated Partner, ensuring legal and financial compliance.

If the LLP forgets to file its annual return, Meena (the designated partner) can be fined for non-compliance, not Ravi.

Conclusion

In an LLP, every designated partner is a partner, but not every partner is a designated partner. Partners handle business functions, while designated partners handle statutory compliance. Understanding this distinction is vital for any entrepreneur setting up or managing an LLP, as it affects not just business operations but also legal accountability and reputation.