The word ‘Partner‘ is a common term which is used to indicate any person who invests his/her capital to partnership business and agrees to share profits and losses, risks and rewards. On the other hand, designated partner, as the name suggests, is the one, whom the other partners appoint, to be responsible for complying with the terms of LLP Act.
What is a General Partnership?
General Partnership is a form of business organization in which two or more than two persons, unite to start a lawful business and agree to share profits and losses. That means, in a partnership business, the ownership of the concern is divided amongst the partners.
What is a Limited Liability Partnership (LLP)?
LLP is a recently introduced form of business organization, which integrates the features of Partnership and Company.
Content: Partner Vs Designated Partner
|Basis for Comparison||Partner||Designated Partner|
|Meaning||When two or more persons enter into partnership business with one another, they are individually called as partners.||Designated Partner refers to any partner who is appointed as such, in the incorporation document, at the time of LLP registration.|
|Context||General Partnership and Limited Liability Partnership||Limited Liability Partnership only.|
|Act as||Agent||Agent as well as Directors|
|Eligibility Criteria||Any person or body corporate can become a partner.||Only individuals can be selected or appointed as a designated partner.|
|Duties, Rights and Liabilities||Partner's duties, rights and liabilities are stated in Partnership Deed in case of General Partnership and in LLP Agreement in case of Limited Liability Partnership.||The duties, rights and liabilities of designated partners are stated in the LLP Agreement.|
|Accountability for regulatory and legal compliance||No||Yes|
|Identification Number||No requirement for obtaining an identification number.||Every designated partner is required to obtain a DPIN (Designated Partner Identification Number).|
Definition of Partner
Partner refers to any individual or body corporate, who joins the partnership business as a member to share the profits and losses in an agreed ratio. So, basically, a partner is the partial owner of the partnership business.
Further, the partners are obligated to undertake the partnership business, to the greatest common advantage to be just and fair with one another as well as to furnish true accounts and complete information, of all the material things, which may influence any partner.
Types of Partner
There are seven types of partner, discussed as under:
- Active Partner: An active partner is one who contributes his/her capital to the partnership business and also actively participates in the day to day operations, to run the business.
- Dormant Partner: Otherwise called a sleeping partner. He/She contributes his capital to the business but passively takes part in the business.
- Secret Partner: As the name describes, a secret partner is one who makes a capital contribution, to the firm’s business and also takes part in the day to day operations actively, but his/her presence is kept hidden, from the general public.
- Nominal Partner: These are titular partner, who exist in name only. Hence, they neither contribute to the capital nor participate in business activities.
- Partner by Estoppel: The one who is not a part of business, but people see him/her as a part of business, is termed as a partner by estoppel.
- Partner by Holding out: If a person discloses himself/herself as a part of business, while he/she is not a partner in reality. Hence, he/she is called a partner by holding out.
- Minor Partner: As the name signifies, a minor partner is the one who has not attained the age of majority, i.e. 18 years. And so he is the partner in profits only and can be considered as a beneficiary of partnership.
Definition of Designated Partner
The concept of Designated Partner is put forward by the Limited Liability Partnership Act, 2008. The work of a designated partner is exactly the same as the Directors of a Company, but with more rights and privileges.
All the Designated Partner of the LLP must obtain a DPIN, i.e. Designated Partner Identification Number. At the time of registration, the document must specify, at least two persons as designated partners. In the absence of any specification, any partner whose name is first listed in the statement of partners in the declaration will be considered as a designated partner.
Additionally, any partner can be assigned the role of designated partner in an LLP, subject to the consent of the other partners.
As per the Limited Liability Partnership Act, 2008, at least two partners are to be appointed as ‘designated partner’ in the incorporation document, who must be individuals. Although, if no person is specified, then every partner of the LLP will be regarded as a designated partner.
Further, one of the two designated partners should be India’s resident. However, if in an LLP all the partners are Companies, or in which one or more partners are individuals and companies, then a minimum of two persons who joined LLP as partners or nominees of the Company, can be appointed as designated partners.
Key Differences Between Partner and Designated Partner
The points given below are substantial so far as the difference between a partner and designated partner is concerned:
- Any person who joins the partnership business with other persons is individually called “partner” and collectively known as “firm”. Conversely, Designated Partner implies any partner recognized as such in the incorporation document, at the time of registration of the Limited Liability Partnership.
- The word ‘partner’ is a very common term, which is used in the context of both General Partnership and Limited Liability Partnership. As against, the term ‘designated partner’ is used in the context of LLP, only.
- While partners act as the agent of the partnership firm, designated partners act as an agent of the partnership firm, while working as a Director.
- Any person or body corporate can become a partner in a partnership firm. But only individuals can be appointed as a designated partner.
- Partner’s duties, rights and liabilities are given in Partnership Deed in case of General Partnership and in LLP Agreement in case of Limited Liability Partnership. Contrastingly, the duties, rights and liabilities of the designated partners are stated in the LLP Agreement.
- A partner is neither responsible, nor held liable for the payment of penalties in case of non-compliance of the provisions of LLP Act. However, the designated partners have extended liability for the penalties levied on the LLP in case of non-compliance in relation to filing the documents, returns, account statements. Further, the designated partners are personally or severally liable.
- A partner is not required to obtain an identification number from the relevant authority. Conversely, the designated partners need to obtain a DPIN (Designated Partner Identification Number).
So, the term ‘partner’ can be used in a general sense, to mean a member of the partnership business. But, a designated partner is the one authorized by the other partners, to perform the role, who is subject to perusal and rotation.