LLP with partner capital and trading in stocks. is it legally allowed?

LLP registration: You will need to register the LLP with the Ministry of Corporate Affairs (MCA). You will need a digital sginature certificate (DSC) and a Designated partner Identification Number (DPIN) for both you and your partner.

LLP agreement: Draft an LLP agreement outlining the terms like capital contribution profit sharing roles, and responsibilities. This is super important to avid any future disputes. 

SEBI Compliance: Since you will be trading in the stock market, ensure you comply with SEBI (Securities and Exchange Board of India) regulations. You will need to open a trading account in the name of the LLP. 

Taxation: Understand the tax implications for an LLP in India. LLPs are pass-through entities for tax purposes, meaning profits are taxed in the hands of the partners. 

Thanks a lot for your detailed response. that really helped!

Yes, an LLP can carry on stock trading as its business activity, provided the LLP agreement explicitly states this as a permitted object.

Key requirements to get this right:
1. The LLP agreement must include share trading or investment activity as an authorised object
2. A demat and trading account must be opened in the NAME OF THE LLP, not in individual partner names
3. Capital contribution should be documented clearly in the LLP agreement with profit sharing ratios
4. ITR-5 must be filed annually for the LLP ,  trading income is treated as business income for the firm

On SEBI registration: An LLP is NOT required to register with SEBI for trading its own capital. SEBI registration is only needed if you are managing funds for third parties (portfolio manager licence) or running a mutual fund. Self-directed trading through an LLP is lawful without any SEBI registration.

One tax note: Profit distributed to partners from LLP is tax-exempt in partners hands under Section 10(2A). But the LLP itself pays tax on its business income at 30% plus applicable surcharge.

For end-to-end LLP formation including drafting the agreement for stock trading activity, see [Tax Garden LLP registration service](https://taxgarden.in/services/llp-registration).