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Contribution in LLPl

Contribution as per the lexicon interpretation means “Part or Share”. In reference to LLP, contribution can be termed as, What a partner is contributing towards the Limited Liability Partnership for running of his business. For ease of understanding, what Share Capital is in case of Company, is Contribution in case Limited Liability Partnership. Therefore, in case of LLP, the ownership will be judged on the basis of contribution by the partners in the LLP.

Is it necessary to contribute for a Partner?

No, as per LLP Act 2008 Contribution is not a pre requisite for formation of a Limited Liability Partnership or for being a Partner in any Limited Liability Partnership. Under the Act, organizational flexibility has been offered to the Partners through LLP Agreement wherein the Partners can decide the amount and form of Contribution as per their suitability. The LLP Agreement must specify the contribution intended to be paid by all the members and the form in which it will be paid.

Form of Contribution

As per the requisite of Section 32(1) of LLP Act 2008 the contribution can be in the form of tangible, movable or immovable or intangible property or other benefit to the limited liability partnership, including money, promissory notes, and 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 accounted for and disclosed in the accounts of the limited liability partnership in the manner as may be prescribed.

Valuation of Intangible Contribution In case of intangible form of Contribution, the value of the same shall be certified by a practicing Chartered Accountant or Cost Accountant or by approved valuer from the panel maintained by the Central Government. The monetary value of contribution of each partner shall be accounted for and disclosed in the accounts of the Limited Liability Partnership in the manner as may be prescribed.

Return of contribution, in case of cessation of Partner

Whenever a partner of a LLP ceases to be a partner than unless otherwise provided in the LLP agreement, the former partner or a person entitled to his share in consequence of the death or insolvency of the former partner, shall be entitled to receive from the limited liability partnership, an amount equal to the capital contribution of the former partner actually made to the limited liability partnership.

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