What is the meaning of Change in Profit Sharing Ratio?

Change in Profit-Sharing Ratio means change in ratio in which profit or loss of the LLP shared by the partners/designated partners.

Need for Change in Profit Sharing Ratio:

The need for change in Profit Sharing Ratio may arise due to change in the business structure of the LLP. The change in profit sharing ratio shall be as per the provisions of LLP Act, 2008, regulations and procedure laid down in the LLP Agreement.

STEPS

Steps Involved for Change in Profit Sharing Ratio:

Step-1: Obtain approval of the partners for change in profit sharing ratio:

The partners need to decide in a properly convened meeting as per the LLP agreement for proposed new profit sharing ratio of the partners/designated partners of the LLP. After the decision has arrived the same must be written and signed by the partners.

Step-3: Drafting of Amendment LLP Agreement:

The next step after obtaining written consent of the partners for change in profit sharing ratio is to draft and execute the amendment LLP Agreement with proposed profit sharing ratio among the partners of LLP.

Step-3: Filing of Forms with RoC:

The amended LLP agreement along with the written consent of partners for change in the profit sharing ratio of the LLP need to be filed in Form No-3 of the LLP.

Documents

Documents Required for Change in Profit Sharing Ratio:

  • List of Designated Partner & Partners.
  • Initial LLP Agreement.
  • Details of proposed profit sharing ratio pattern.
  • Digital Signature (DSC) of any one of the Designated Partner of the LLP.