Partner Contributions

• LLPs primarily raise capital through contributions from existing or new partners
  
• Contributions can be in the form of cash, property, assets, or services
  
• Each partner’s share must be recorded in the LLP Agreement
  
• The profit-sharing ratio and voting rights are often based on capital contributions
  
• Additional contributions require an amendment to the LLP Agreement and filing with the Registrar
  

Admission of New Partners

• LLPs can induct new partners to bring in additional capital
  
• New partners must consent to join and comply with statutory requirements
  
• Their contributions can increase the LLP’s working capital or asset base
  
• Changes in partnership and contributions must be filed in Form 4 and Form 3 with the MCA
  
• The LLP must update the profit-sharing and management rights accordingly
  

Partner Loans and Borrowings

• LLPs can raise funds through loans from partners, which are recorded as liabilities, not capital
  
• These loans must be documented with clear repayment terms and interest provisions
  
• Partner loans are often used for short-term financial needs or operational expansion
  
• LLPs must maintain proper board resolutions and documentation for such borrowings
  
• Interest paid on partner loans is tax-deductible, subject to limits
  

External Funding Options

• LLPs can raise funds through bank loans, NBFCs, or private lenders, subject to creditworthiness
  
• LLPs can accept unsecured or secured loans based on business requirements
  
• They must maintain appropriate loan agreements, security documents, and repayment schedules
  
• External borrowings do not grant ownership rights or control
  
• LLPs cannot issue shares, debentures, or equity, unlike companies
  

Private Arrangements and Venture Debt

• LLPs may explore private funding arrangements like venture debt, convertible loans, or strategic investments
  
• These require custom contracts since LLPs cannot offer equity or ownership rights
  
• Investors may be offered profit-linked returns or fixed repayment terms
  
• LLPs must ensure such arrangements do not violate the LLP Act or RBI regulations
  
• Professional advice is essential to structure and document such deals legally