Know the Difference Between Partner & Designated Partner

Partner is a common word for anyone who puts money into a business with another person and agrees to share both profits and losses, as well as risks and rewards. On the other hand, as the name suggests, the designated partner is the one who the other partners choose to be in charge of following the rules of the LLP Act.

Table of Contents

What is a General Partnership?

In a general partnership, two or more people work together to start a legal business and agree to share both profits and losses. That means that in a partnership business, the partners share ownership of the business.

What is a Limited Liability Partnership (LLP)?

LLPs are a relatively new way to run a business. It combines the best parts of Partnership and Company.

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Content: Partner Vs Designated Partner

Comparison Chart
Definition
Key Differences
Conclusion

Comparison Chart

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 means any person or business that joins a business partnership as a member to share the profits and losses in an agreed-upon way. So, in a partnership business, a partner is a part-owner of the business.

Also, the partners are required to run the business in a way that benefits everyone, to be fair and honest with each other, and to give true accounts and full information of all the material things that could affect any partner.

Types of Partners

There are seven different kinds of partners, which are:

Active Partner: An active partner is someone who puts money into the business and helps run it every day.
Dormant Partner: This is also known as a “sleeping partner.” He or she gives money to the business but doesn’t do much else for the business.
Secret Partner: As the name suggests, a “secret partner” is someone who invests money in the business and takes an active role in day-to-day operations but whose presence is kept secret from the public.
Nominal Partner: These are partners with names, but they don’t really exist. So, they don’t put money into the business or take part in its activities.
Partner by Estoppel: People call someone a partner by estoppel if they are not a part of the business but act like they are.
Partner by Holding Out: If a person says he or she is part of a business when he or she is not really a partner, So, someone who holds out is called a partner.
Minor Partner: A “minor partner” is someone who hasn’t reached the age of majority, which is 18 years old. So, he is only a partner when there are profits, and he can be thought of as a beneficiary of the partnership.

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Definition of Designated Partner

The Limited Liability Partnership Act brings up the idea of a “designated partner“. A designated partner does the same work as a company’s directors but has more rights and privileges.

All of the LLP’s “designated partners” must get a “Designated Partner Identification Number,” or “DPIN.” At the time of registration, at least two people must be named as designated partners on the document. If nothing else is said, the partner whose name comes first in the declaration’s statement of partners will be considered the designated partner.

Also, in an LLP, any partner can be given the role of “designated partner,” as long as the other partners agree.

According to the Limited Liability Partnership Act of 2008, at least two partners must be named in the incorporation document as “designated partners.” These “designated partners” must be people. If no one is named, however, every partner in the LLP will be considered a designated partner.

Also, one of the two people named as partners should live in Dubai. But if all of the partners in an LLP are companies, or if one or more of the partners are both individuals and companies, then at least two people who joined the LLP as partners or nominees of the company can be named as designated partners.

The LLP agreement can let the role of designated partner be looked at and changed so that each partner can take part.

Key Differences Between Partners and Designated Partners

The following are important points that show the difference between a partner and a designated partner:

Each person who joins a business partnership with other people is called a “partner,” and the group is called a “firm.” On the other hand, a designated partner is any partner named as such in the limited liability partnership’s incorporation document at the time of registration.
“Partner” is a very common word that can be used in both a general partnership and a limited liability partnership. On the other hand, the term “designated partner” is only used in LLPs.
Partners act as the firm’s agents, but designated partners also act as agents of the firm while working as directors.
A partnership firm can have any person or business as a partner. But a designated partner can only be a single person.
In a general partnership, the partnership deed spells out the duties, rights, and responsibilities of each partner. In a limited liability partnership, the LLP Agreement does the same thing. On the other hand, the LLP Agreement spells out the duties, rights, and responsibilities of the designated partners.
If a partner doesn’t follow the rules of the LLP Act, they won’t have to pay fines or be held responsible for them. But the designated partners are also responsible for the fines that the LLP has to pay if it doesn’t file the required documents, returns, and account statements. Also, each of the named partners is personally or jointly responsible.
A partner does not have to get an ID number from the right organisation. On the other hand, the partners need to get a DPIN (Designated Partner Identification Number).

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Conclusion

So, the word “partner” can be used in a general way to refer to someone who is part of a business partnership. But a designated partner is the one who has been given permission by the other partners to do the job. This person is subject to review and change.

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