After Registration of the LLP the partner can change the Profit sharing ratio without any admission or retirement of the partner. This may result in the gain to a few partners and loss to others. The partners who are in profit due to this change should compensate the sacrificing partner/partners in the profit sharing ratio
The LLP need to follow the procedures mentioned in the LLP agreement. Usually, with the consent of partners, LLP can change profit ratio by an amendment to LLP agreement.Since, proft right in an LLP is a transferable commodity, proper assignment/transfer document need to be executed to effect transfer of profit ratio to another partner.
What is the Procedure for Changing the Profit Ratio?
- Existing LLP Agreement: Before effecting transfer among the partners (profit ratio), terms and conditions of LLP agreement regarding transfer of rights among the partners and procedures taken in to consideration.
- Partner meeting: Before any change the existing partners, LLP call a meeting for approval of the proposed change.
- Pass resolution to affect the change: To effect the changes in the LLP, the partners shall pass a resolution at the meeting of the partner. The resolution shall be authorised the existing designated partner.
- File an Application for approval of change: After executing transfer deed, LLP agreement need to
be amended to reflect the changes and a copy of the amended LLP agreement shall be filed
- Existing LLP Agreement
- New Resolution
- DSC for filling the form