Form/Manner of Capital contribution

As per the provisions of Section 32 of Limited Liability Partnership Act, 2008, contribution of a partner may consists of tangible, movable or immovable or intangible property or other benefit to the limited liability partnership, including money, promissory notes, other agreements to contribute cash or property, and contracts for services performed or to be performed. The monetary value of contribution of each partner shall be disclosed in the accounts of LLP in the prescribed manner.

Obligation to Contribute to Capital of LLP

As per the provisions of Section 33 of Limited Liability Partnership Act, 2008, the obligation to contribute to the capital of LLP by each partner shall be as per the subscriber sheet being filled by the Company to the Concerned Registrar of Companies at the time of the LLP Incorporation and the same amount shall be written in the LLP agreement which is filled by the Company to the Concerned Registrar of Companies.

There are 3 options to trat the excess amount; if a partner contributes in excess of the obligation being undertaken by him at the time of the Incorporation of LLP

(Explained with the help of an example)

Example:

If XYZ LLP has a total contribution of Rs. 1, 00,000/- being undertaken by the Partner A and B in equal proportion i.e. Rs. 50,000/- each but A has transferred the amount of Rs. 51,000/- in the XYZ LLP’s Bank Account stated the contribution. Therefore, A has contributed in excess of his obligation at the time of incorporation. Hence, the LLP shall have three options to trat this excess amount of capital contribution:

the LLP shall have three options to trat this excess amount of capital contribution

 

Refund/Payback of Contribution

When a Partner resigns from the office of partner of LLP, As per Section 24 of the Limited Liability Partnership Act, 2008, he shall receive an amount equal to his capital contribution from the LLP upon such resignation.

About the Author

ACS Divya GoelAuthor is Divya Goel, ACS working as Assistant Manager- Company Secretary with Neeraj Bhagat & Co. Chartered Accountants, a Chartered Accountancy firm helping foreign companies in setting up business in India and complying with various tax laws applicable to foreign companies while establishing their business in India. Author can be reached at info@neerajbhagat.com.

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Company: Neeraj Bhagat & Co.
Location: New Delhi, New Delhi, IN
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Neeraj Bhagat & Co. is helping foreign companies in opening up of Liaison/ Branch Office in India and complying with various tax laws applicable to foreign companies while establishing a business in India. Neeraj Bhagat is the founder of Neeraj Bhagat & Co. Chartered Accountants, a Chartered View Full Profile

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10 Comments

  1. Sahil says:

    After some days of incorporation of LLP within the Capital of Rs. 1 Lakh as stated in LLP Agreement, all the partners add 3-4 Lakhs in the bank account of LLP for more efficient working of LLP, Then again the agreement will be submitted or it will be OK?

    1. Neeraj Bhagat & Co. says:

      If the partners had contributed to LLP more than their obligation as per Initial LLP Agreement, then the supplementary agreement of LLP shall be submitted with the MCA for their approvals within 30 days of such additions .

  2. Neeraj Bhagat & Co. says:

    If the partner adds more capital into the Bank Account of LLP, that capital will be added to initial capital and profit sharing ratio will be adjusted according to new capital structure of the LLP.

  3. SOUMYAKANT DAS says:

    What if a partner introduced some more capital after few years? Will this amount be added to initial fund and profit sharing adjusted or the present valuation of the company is taken to consideration to distribute the ownership %

    1. Neeraj Bhagat & Co. says:

      As per LLP Act, 2008, the time limit to put in the capital contribution by the partners in LLP’s Bank Account is not prescribed. It is advisable as soon as the bank opened, transfer the capital contribution .

  4. Rohit Sharma says:

    Can the excess amount contributed by partner be shown as variable or fluctuating capital and the same can be treated as Reserve and Surplus while filing up Form 8 of the LLP??
    Please suggest.

    Thanks

  5. Rahul Thapliyal says:

    We have a Limited Liability Partnership. Wherein we wants to introduce to new designated partners. So in that case new designated partners should bring his contribution or existing partners can transfer his share to new partners . Please suggest what to do.

    1. In case of LLP, when a new partner is introduced then he will contribute his share of contribution into the LLP and the outgoing partner shall take his share of contribution with himself.
      As per LLP Act, there is no criteria for transfer of contribution from one partner to another partner.

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