CA CS KARTHIK MANIKONDA

Limited Liability Act,2008

QUESTION NO 1 RTP Nov 2021

A and B were friends. Now they have plans of setting up a supermarket in their locality. They are confused
as to whether to register as a traditional partnership or as a Limited Liability Partnership. As an advisor,
enumerate the differences between the two fo rms of business highlighting the compliances and other legal
formalities
ANSWER
Comparison between an LLP and partnership can be analysed on the below tabulated parameters.

Basis LLP Partnership firm

1. Regulating Act The Limited Liability Partnership Act, The Indian Partnership Act, 1932.
2008.
2. Body corporate It is a body corporate. It is not a body corporate,
3. Separate It is a legal entity separate from its It is a group of persons with no
legal members. separate legal entity.
entity
4. Creation It is created by a legal process called It is created by an agreement
registration under the LLP Act, 2008. between the partners.

5. Registration Registration is mandatory. LLP can sue Registration is voluntary. Only the
and be sued in its own name. registered partnership firm can sue
the third parties.
6. Perpetual The death, insanity, retirement or The death, insanity, retirement or
succession insolvency of the partner(s) does not insolvency of the partner(s) may
affect its existence of LLP. Members affect its existence. It has no
may join or leave but its existence perpetual succession.
continues forever.

7. Name Name of the LLP to contain the word No guidelines. The partners can have
limited liability partners (LLP) as suffix. any name as per their choice.

8. Liability Liability of each partner limited to the Liability of each partner is unlimited.
extent to agreed contribution except in It can be extended upto the personal
case of willful fraud. assets of the partners.
9. Mutual agency Each partner can bind the LLP by his own Each partner can bind the firm as well
acts but not the other partners. as other partners by his own acts.

10 Designated t least two designated partners and atleast one

hereofis no provision for such partners under the
. partners them shall be resident in India. rtnership Act, 1932.

QUESTION NO 2 RTP May 2022

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“LLP is an alternative corporate business form that gives the benefits of limited liability of a company and
the flexibility of a partnership”. Explain.
ANSWER
LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the
flexibility of a partnership

Limited Liability:
Every partner of a LLP is, for the purpose of the business of LLP, the agent of the LLP, but not of other partners
(Section 26 of the LLP Act, 2008). The liability of the partners will be limited to their agreed contribution in
the LLP, while the LLP it self will be liable for the full extent of its assets.

Flexibility of a partnership:
The LLP allows its members the flexibility of organizing their internal structure as a partnership based on a
mutually arrived agreement. The LLP form enables entrepreneurs, professionals and enterprises providing
services of any kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles
suited to their requirements. Owing to flexibility in its structure and operation, the LLP is a suitable vehicle for
small enterprises and for investment by venture capital.

QUESTION NO 3 RTP Nov 2022

What is the procedure for maintenance of books of account, other records and audit of Limited Liability
Partnership under LLP Act, 2008?
ANSWER
Maintenance of books of account, other records and audit, etc. (Section 34 of LLP Act, 2008):

The LLP shall maintain such proper books of account as may be prescribed relating to its affairs for each year
of its existence on cash basis or accrual basis and according to double entry system of accounting and shall
maintain the same at its registered office for such period as may be prescribed.

Every LLP shall, within a period of six months from the end of each financial year, prepare a Statement of
Account and Solvency for the said financial year as at the last day of the said financial year in such form as may
be prescribed, and such statement shall be signed by the designated partners of the LLP.

Every LLP shall file within the prescribed time, the Statement of Account and Solvency prepared with the
Registrar every year in such form and manner and accompanied by such fees as may be prescribed.

The accounts of LLP shall be audited in accordance with such rules as may be prescribed.

QUESTION NO 4 RTP May 2023

Explain the Small Limited Liability Partnership under the LLP Act, 2008.
ANSWER
Small Limited Liability Partnership [Section 2(ta) of the LLP Act, 2008]: It means a limited liability
partnership—
(i) the contribution of which, does not exceed twenty-five lakh rupees or such higher amount, not exceeding
five crore rupees, as may be prescribed; and
(ii) the turnover of which, as per the Statement of Accounts and Solvency for the immediately preceding
financial year, does not exceed forty lakh rupees or such higher amount, not exceeding fifty crore rupees,
as may be prescribed; or
(iii) which meets such other requirements as may be prescribed, and fulfils such terms and conditions as may be
prescribed.

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QUESTION NO 5 RTP Nov 2023

Discuss the conditions under which LLP will be liable and not liable for the acts of the partner under Limited
Liability Partnership Act, 2008.
ANSWER
Conditions under which LLP will be liable [Section 27(2) of the LLP Act, 2008]
The LLP is liable if a partner of a LLP is liable to any person as a result of a wrongful act or omission on his part
in the course of the business of the LLP or with its authority.
Conditions under which LLP will not be liable [Section 27(1) of the LLP Act, 2008]
A LLP is not bound by anything done by a partner in dealing with a person if—
(a) the partner in fact has no authority to act for the LLP in doing a particular act; and
(b) the person knows that he has no authority or does not know or believe him to be a partner of the LLP.

QUESTION NO 6 RTP May 2024

A & B were friends. Now they have plans of setting up a supermarket in their locality. They are confused
as to whether to register as a traditional partnership or as a Limited Liability Partnership. As an advisor,
enumerate the differences between the two forms of business highlighting the compliances & other legal
formalities.
ANSWER
Comparison between a Limited Liability Partnership (LLP) and partnership can be analysed on the below
tabulated parameters.
Basis LLP Partnership firm
1. Regulating Act The Limited Liability Partnership Act, 2008. The Indian Partnership Act, 1932.

2. Body corporate It is a body corporate. It is not a body corporate.

3. Separate legal It is a legal entity separate from its It is a group of persons with no
entity members. separate legal entity.
4. Creation It is created by a legal process called It is created by an agreement
registration under the LLP Act, 2008. between the partners.
5. Registration Registration is mandatory. LLP can sue and be Registration is voluntary. Only
sued in its own name. the registered partnership firm
can sue the third parties.
6. Perpetual succession The death, insanity, retirement or insolvency The death, insanity, retirement or
of the partner(s) does not affect its insolvency of the partner(s) may
existence of LLP Members may join or leave affect its existence. It has no
but its existence continues forever perpetual succession.
7. Name Name of the LLP to contain the word limited No guidelines. The partners can
liability partners (LLP) as suffix. have any name as per their choice.
8. Liability Liability of each partner limited to the extent Liability of each partner is
to agreed contribution except in case of unlimited. It can be extended upto
willful fraud. the personal assets of the
partners.
9. Mutual agency
Each partner can bind the LLP by his own acts but
Each
notpartner
the can bind the firm as well as othe
other partners. partners by his own acts.

10. Designated partners At least two designated partners and atleast There is no provision for such
one of them shall be resident in India. partners under the Partnership
Act, 1932.

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11. Common seal It may have its common seal as its official signatures
There is no such concept in partnership

12. Legal compliances Only designated partners are responsible for All partners are responsible for all
all the compliances and penalties under this the compliances and penalties
Act. under the Act.
13. Annual filing of LLP is required to file: rtnership firm is not required to file any a
documents (i) Annual statement of accounts Statement o document with
solvency Annual return with the registration
LLP every year.
14. Foreign partnership Foreign nationals can become a partner in a Foreign nationals cannot become a
LLP. partner in a partnership firm.
17. Minor as partner Minor cannot be admitted to the benefits of Minor can be admitted to the
LLP. benefits of the partnership with
the prior consent of the existing
partners.

QUESTION NO 7 RTP Sep 2024

State the rules regarding registered office of a Limited Liability Partnership (LLP) and change therein as
per provisions of the Limited Liability Partnership Act, 2008.
ANSWER
Registered office of LLP and Change therein (Section 13 of the Limited Liability Partnership Act, 2008)
(i) Every LLP shall have a registered office to which all communications and notices may be addressed and where
they shall be received.
(ii) A document may be served on a LLP or a partner or designated partner thereof by sending it by post under
a certificate of posting or by registered post or by any other manner, as may be prescribed, at the registered
office and any other address specifically declared by the LLP for the purpose in such form and manner as may
be prescribed.
(iii) A LLP may change the place of its registered office and file the notice of such change with the Registrar in
such form and manner and subject to such conditions as may be prescribed and any such change shall take effect
only upon such filing.
(iv) If the LLP contravenes any provisions of this section, the LLP and its every partner shall be liable to a penalty
of ` 500 for each day during which the default continues, subject to a maximum of ` 50,000 for the LLP and its
every partner.

QUESTION NO 8 RTP Jan 2025

A LLP is a new form of legal business entity with limited liability. It's an alternative corporate business
vehicle that only gives the benefits of limited liability at low compliance cost but allows its partners the
flexibility of organizing their internal structure as a traditional partnership. Keeping in view of above,
define the following characteristics of LLP.
(i) Body Corporate
(ii) Mutual Agency
(iii) Foreign LLPs
(iv) Artificial legal person
ANSWER
Body corporate:
Section 2(1)(d) of the LLP Act, 2008 provides that a LLP is a body corporate formed and incorporated under this
Act and is a legal entity separate from that of its partners and shall have perpetual succession. Therefore, any
change in the partners of a LLP shall not affect the existence, rights or liabilities of the LLP.

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Section 3 of LLP Act, 2008, provides that a LLP is a body corporate formed and incorporated under this Act and
is a legal entity separate from that of its partners.

Mutual Agency:
No partner is liable on account of the independent or un-authorized actions of other partners, thus individual
partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
In other words, all partners will be the agents of the LLP alone. No one partner can bind the other partner by
his acts.

Foreign LLPs:
Section 2(1)(m) defines foreign limited liability partnership “as a limited liability partnership formed,
incorporated, or registered outside India which established as place of business within India”. Foreign LLP can
become a partner in an Indian LLP.

Artificial Legal Person:

A LLP is an artificial legal person because it is created by a legal process and is clothed with all rights of an
individual. It can do everything which any natural person can do, except of course that, it cannot be sent to jail,
cannot take an oath, cannot marry or get divorce nor can it practice a learned profession like CA or Medicine. A
LLP is invisible, intangible, immortal (it can be dissolved by law alone) but not fictitious because it really exists.

QUESTION NO 9 MTP Nov 2021

“LLP is an alternative corporate business form that gives the benefits of limited liability of a company and
the flexibility of a partnership”. Explain.
ANSWER
LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the
flexibility of a partnership.

Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the agent of the LLP, but
not of other partners (Section 26 of the LLP Act, 2008). The liability of the partners will be limited to their
agreed contribution in the LLP, while the LLP it self will be liable for the full extent of its assets.

Flexibility of a partnership: The LLP allows its members the flexibility of organizing their internal structure as
a partnership based on a mutually arrived agreement. The LLP form enables entrepreneurs, professionals and
enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially
efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP is a
suitable vehicle for small enterprises and for investment by venture capital.

QUESTION NO 10 MTP May 2022

Limited Liability Partnership (LLP) gives the benefits of limited liability of a company on one hand and the
flexibility of a partnership on the other. Discuss.
ANSWER
LLP gives the benefits of limited liability of a company and the flexibility of a partnership

Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the agent of the LLP, but
not of other partners (Section 26 of the LLP Act, 2008). The liability of the partners will be limited to their
agreed contribution in the LLP, while the LLP itself will be liable for the full extent of its assets.

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Flexibility of a partnership: The LLP allows its members the flexibility of organizing their internal structure as
a partnership based on a mutually arrived agreement. The LLP form enables entrepreneurs, professionals and
enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially
efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP is a
suitable vehicle for small enterprises and for investment by venture capital.

QUESTION NO 11 MTP May 2022

What do you mean by Designated Partner? Whether it is mandatory to appoint Designated partner in a
LLP?
ANSWER
Designated Partner [Section 2(j)]: “Designated partner” means any partner designated as such pursuant to
section 7.
According to section 7 of the LLP Act, 2008:
(i) Every LLP shall have at least two designated partners who are individuals and at least one of them shall be a
resident in India.
(ii) If in LLP, all the partners are bodies corporate or in which one or more partners are individuals and bodies
corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act
as designated partners.

QUESTION NO 12 MTP Nov 2022

What is Small Limited Liability Partnership as per Limited Liability Partnership (Amendment) Act, 2021?
ANSWER
“Small Limited Liability Partnership [Section 2(ta) of the Limited Liability Partnership Act, 2008]: It means
a Limited Liability Partnership— the contribution of which, does not exceed twenty-five lakh rupees or such
higher amount, not exceeding five crore rupees, as may be prescribed; and the turnover of which, as per the
Statement of Accounts and Solvency for the immediately preceding financial year, does not exceed forty lakh
rupees or such higher amount, not exceeding fifty crore rupees, as may be prescribed; or which meets such other
requirements as may be prescribed and fulfils such terms and conditions as may be prescribed.

QUESTION NO 13 MTP Nov 2022

Limited Liability Partnership (LLP) gives the benefits of limited liability of a company on one hand and the
flexibility of a partnership on the other. Discuss.
ANSWER
LLP gives the benefits of limited liability of a company and the flexibility of a partnership

Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the agent of the LLP, but
not of other partners (Section 26 of the LLP Act, 2008). The liability of the partners will be limited to their
agreed contribution in the LLP, while the LLP itself will be liable for the full extent of its assets.

Flexibility of a partnership: The LLP allows its members the flexibility of organizing their internal structure as
a partnership based on a mutually arrived agreement. The LLP form enables entrepreneurs, professionals and
enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially
efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP is a
suitable vehicle for small enterprises and for investment by venture capital.

QUESTION NO 14 MTP May 2023

“LLP is an alternative corporate business form that gives the benefits of limited liability of a company and
the flexibility of a partnership”. Explain.
ANSWER

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LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the
flexibility of a partnership

Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the agent of the LLP, but
not of other partners (Section 26 of the LLP Act, 2008). The liability of the partners will be limited to their
agreed contribution in the LLP, while the LLP itself will be liable for the full extent of its assets.

Flexibility of a partnership: The LLP allows its members the flexibility of organizing their internal structure as
a partnership based on a mutually arrived agreement. The LLP form enables entrepreneurs, professionals and
enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially
efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP is a
suitable vehicle for small enterprises and for investment by venture capital.

QUESTION NO 15 MTP May 2023

Enumerate the circumstances in which Limited Liability Partnership (LLP) may be wound up by Tribunal under
the LLP Act, 2008.
ANSWER
Circumstances in which LLP may be wound up by Tribunal (Section 64 of the LLP Act, 2008):
A LLP may be wound up by the Tribunal:
(a) if the LLP decides that LLP be wound up by the Tribunal;
(b) if, for a period of more than six months, the number of partners of the LLP is reduced below two;
(c) if the LLP is unable to pay its debts;
(d) if the LLP has acted against the interests of the sovereignty and integrity of India, the security of the
State or public order;
(e) if the LLP has made a default in filing with the Registrar the Statement of Account and Solvency or annual
return for any five consecutive financial years; or
(f) if the Tribunal is of the opinion that it is just and equitable that the LLP be wound up.

QUESTION NO 16 MTP Nov 2023

"A LLP (Limited Liability Partnership) is a type of partnership in which participants' liability is fixed to the
amount of money they invest whereas a LLC (Limited Liability Private/Public Company) is a tightly held
business entity that incorporates the qualities of a corporation and a partnership".
In line of above statement clearly elaborate the difference between LLP and LLC.
ANSWER
Distinction between Limited Liability Partnership (LLP) and Limited Liability Company (LLC)
S.No. Basis Limited Liability Partnership Limited Liability Company (LLC)
(LLP)
1. Regulating Act The LLP Act, 2008. The Companies Act, 2013.
2. Members/Partners The persons who contribute to LLP The persons who invest the money in
are known as partners of the LLP. the shares are known as members of
the company.
3. Internal governance The internal governance structure of The internal governance structure of a
structure a LLP is governed by agreement company is regulated by statute (i.e.,
between the partners. Companies Act, 2013) read with its
Memorandum of Association and
Articles of Association.

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4. Name Name of the LLP to contain the word Name of the public company to contain
“Limited Liability partnership” or the word “limited” and Pvt. Co. to
“LLP” as suffix. contain the word “Private limited” as
suffix.
5. No.Of members/ Minimum – 2 partners Maximum – No Private company:
partners such limit on the partners in the Act. Minimum – 2 members Maximum 200
The partners of the LLP can be members Public company:
individuals/or body corporate Minimum – 7 members Maximum – No
through the nominees. such limit on the members.
Members can be organizations, trusts,
another business form or individuals.
6. Liability of Liability of a partner is limited to Liability of a member is limited to the
members/partners the extent of agreed contribution. amount unpaid on the shares held by
them.
7. Management The business of the LLP managed by The affairs of the company are
the partners including the managed by board of directors elected
designated partners authorized in by the shareholders.
the agreement.
8. Minimum number of 2 designated partners. Pvt. Co. – 2 directors Public co. – 3
directors/designate d directors
partners

QUESTION NO 17 MTP Nov 2023

Discuss the liabilities of Limited Liability Partnership (LLP) and its partners in case of fraud as per the
provisions of the Limited Liability Partnership Act, 2008.
ANSWER
Unlimited liability in case of fraud (Section 30 of the Limited Liability Partnership Act, 2008):
(1) In case of fraud:
⚫ In the event of an act carried out by a LLP, or any of its partners,
⚫ with intent to defraud creditors of the LLP or any other person, or for any fraudulent purpose,
⚫ the liability of the LLP and partners who acted with intent to defraud creditors or for any fraudulent purpose,
⚫ shall be unlimited for all or any of the debts or other liabilities of the LLP.
However, in case any such act is carried out by a partner, the LLP is liable to the same extent as the partner,
unless it is established by the LLP that such act was without the knowledge or the authority of the LLP.
(2) Punishment: Where any business is carried on with such intent or for such purpose as mentioned in sub-
section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid
shall be punishable with imprisonment for a term up to 5 years and with fine which shall not be less than ` 50,000,
but which may extend to ` 5 Lakhs.
(3) Compensations on commission of fraud: Where a LLP or any partner or designated partner or employee of
such LLP has conducted the affairs of the LLP in a fraudulent manner, then without prejudice to any criminal
proceedings which may arise under any law for the time being in force, the LLP and any such partner or designated
partner or employee shall be liable to pay compensation to any person who has suffered any loss or damage by
reason of such conduct. However, such LLP shall not be liable if any such partner or designated partner or
employee has acted fraudulently without knowledge of the LLP.

QUESTION NO 18 MTP May 2024

“LLP is an alternative corporate business form that gives the benefits of limited liability of a company and
the flexibility of a partnership”. Explain.

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ANSWER
LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the
flexibility of a partnership

Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the agent of the LLP, but
not of other partners. The liability of the partners will be limited to their agreed contribution in the LLP, while
the LLP itself will be liable for the full extent of its assets.

Flexibility of a partnership: The LLP allows its members the flexibility of organizing their internal structure as
a partnership based on a mutually arrived agreement. The LLP form enables entrepreneurs, professionals and
enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially
efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP is a
suitable vehicle for small enterprises and for investment by venture capital.

QUESTION NO 19 MTP May 2024

List the differences between the Limited Liability Partnership (LLP) and the Limited Liability Company.
ANSWER
Distinction between LLP and Limited Liability Company: The points of distinction between a LLP and Limited
Liability Company are tabulated as follows:
S.No. Basis Limited Liability Partnership Limited Liability Company (LLC)
(LLP)
1. Regulating Act The LLP Act, 2008. The Companies Act, 2013.
2. Members/Partners The persons who contribute to LLP The persons who invest the money in
are known as partners of the LLP. the shares are known as members of
the company.
3. Internal governance The internal governance structure of The internal governance structure of a
structure a LLP is governed by agreement company is regulated by statute (i.e.,
between the partners. Companies Act, 2013) read with its
Memorandum of Association and
Articles of Association.
4. Name Name of the LLP to contain the word Name of the public company to contain
“Limited Liability partnership” or the word “limited” and Pvt. Co. to
“LLP” as suffix. contain the word “Private limited” as
suffix.
5. No.Of members/ Minimum – 2 partners Maximum – No Private company:
partners such limit on the partners in the Act. Minimum – 2 members Maximum 200
The partners of the LLP can be members Public company:
individuals/or body corporate Minimum – 7 members Maximum – No
through the nominees. such limit on the members.
Members can be organizations, trusts,
another business form or individuals.
6. Liability of Liability of a partner is limited to Liability of a member is limited to the
members/partners the extent of agreed contribution. amount unpaid on the shares held by
them.
7. Management The business of the LLP managed by The affairs of the company are
the partners including the managed by board of directors elected
designated partners authorized in by the shareholders.
the agreement.

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8. Minimum number of 2 designated partners. Pvt. Co. – 2 directors Public co. – 3

directors/designate d directors
partners

QUESTION NO 20 MTP May 2024

(i) Who are the individuals which shall not be capable of becoming a partner of a Limited Liability
Partnership?
(ii) What are the effects of registration of Limited Liability Partnership?
ANSWER
(i) Partners (Section 5 of Limited Liability Partnership Act, 2008):
Any individual or body corporate may be a partner in a LLP.
However, an individual shall not be capable of becoming a partner of a LLP, if—
a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in
force;
b) he is an undischarged insolvent; or
c) he has applied to be adjudicated as an insolvent and his application is pending.

(ii) Effect of registration (Section 14 of Limited Liability Partnership Act, 2008):

On registration, a LLP shall, by its name, be capable of—
a) suing and being sued;
b) acquiring, owning, holding and developing or disposing of property, whether movable or immovable,
tangible or intangible;
c) having a common seal, if it decides to have one; and
d) doing and suffering such other acts and things as bodies corporate may lawfully do and suffer.

QUESTION NO 21 MTP Sep 2024

What do you mean by Designated Partner? Whether it is mandatory to appoint Designated partner in a
LLP?
ANSWER
Designated Partner [Section 2(1)(j) of the LLP Act, 2008]: “Designated partner” means any partner
designated as such pursuant to section 7.
According to section 7 of the LLP Act, 2008:
(i) Every LLP shall have at least two designated partners who are individuals and at least one of them shall be
a resident in India.
(ii) If in LLP, all the partners are bodies corporate or in which one or more partners are individuals and bodies
corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act
as designated partners.
(iii) Resident in India: For the purposes of this section, the term “resident in India” means a person who has
stayed in India for a period of not less than 120 days during the financial year.

QUESTION NO 22 MTP SEP 2024

“LLP is an alternative corporate business form that gives the benefits of limited liability of a company and
the flexibility of a partnership”. Explain.
ANSWER
LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the
flexibility of a partnership

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Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the agent of the LLP, but
not of other partners. The liability of the partners will be limited to their agreed contribution in the LLP, while
the LLP itself will be liable for the full extent of its assets.

Flexibility of a partnership: The LLP allows its members the flexibility of organizing their internal structure as
a partnership based on a mutually arrived agreement. The LLP form enables entrepreneurs, professionals and
enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially
efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP is a
suitable vehicle for small enterprises and for investment by venture capital.

QUESTION NO 23 PYQ May 2021

Limited Liability Partnership (LLP) gives the benefits of limited liability of a company on one hand and the
flexibility of a partnership on the other. Discuss.
ANSWER
LLP gives the benefits of limited liability of a company and the flexibility of a partnership

Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the agent of the LLP, but
not of other partners (Section 26 of the LLP Act, 2008). The liability of the partners will be limited to their
agreed contribution in the LLP, while the LLP itself will be liable for the full extent of its assets.

Flexibility of a partnership: The LLP allows its members the flexibility of organizing their internal structure as
a partnership based on a mutually arrived agreement. The LLP form enables entrepreneurs, professionals and
enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially
efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP is a
suitable vehicle for small enterprises and for investment by venture capital.

QUESTION NO 24 PYQ Nov 2021

State the rules regarding registered office of a Limited Liability Partnership (LLP) and change therein as
per provisions of the Limited Liability Partnership Act, 2008.
ANSWER
Registered office of LLP and Change therein (Section 13 of the Limited Liability Partnership Act, 2008)

(i) Every LLP shall have a registered office to which all communications and notices may be addressed and where
they shall be received.
(ii) A document may be served on a LLP or a partner or designated partner thereof by sending it by post under
a certificate of posting or by registered post or by any other manner, as may be prescribed, at the registered
office and any other address specifically declared by the LLP for the purpose in such form and manner as may
be prescribed.
(iii) A LLP may change the place of its registered office and file the notice of such change with the Registrar
in such form and manner and subject to such conditions as may be prescribed and any such change shall take
effect only upon such filing.
(iv) If the LLP contravenes any provisions of this section, the LLP and its every partner shall be punishable with
fine which shall not be less than ` 2000, but which may extend to ` 25000.

QUESTION NO 25 PYQ May 2022

Explain the incorporation by registration of a Limited Liability Partnership and its essential elements under
the LLP Act, 2008.
ANSWER
Incorporation by registration (Section 12 of LLP Act, 2008):

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(1) When the requirements imposed by clauses (b) and (c) of sub-section (1) of section 11 have been complied
with, the Registrar shall retain the incorporation document and, unless the requirement imposed by clause (a) of
that sub-section has not been complied with, he shall, within a period of 14 days—
(a) register the incorporation document; and
(b) give a certificate that the LLP is incorporated by the name specified therein.

(2) The Registrar may accept the statement delivered under clause (c) of sub-section
of section 11 as sufficient evidence that the requirement imposed by clause (a) of that sub-section has been
complied with.

(3) The certificate issued under clause (b) of sub-section (1) shall be signed by the Registrar and authenticated
by his official seal.

(4) The certificate shall be conclusive evidence that the LLP is incorporated by the name specified therein.

Essential elements to incorporate Limited Liability Partnership (LLP)

Under the LLP Act, 2008, the following elements are very essential to form a LLP in India:

(i) To complete and submit incorporation document in the form prescribed with the Registrar electronically;
(ii) To have at least two partners for incorporation of LLP [Individual or body corporate];
(iii) To have registered office in India to which all communications will be made and received;
(iv) To appoint minimum two individuals as designated partners who will be responsible for number of duties
including doing of all acts, matters and things as are required to be done by the LLP. At least one of them should
be resident in India.
(v) A person or nominee of body corporate intending to be appointed as designated partner of LLP should hold a
Designated Partner Identification Number (DPIN) allotted by Ministry of Corporate Affairs.
(vi) To execute a partnership agreement between the partners, inter se or between the LLP and its partners. In
the absence of any agreement the provisions as set out in First Schedule of LLP Act, 2008 will be applied.
(vii) LLP Name.

QUESTION NO 26 PYQ Nov 2022

"A LLP (Limited Liability Partnership) is a type of partnership in which participants' liability is fixed to the
amount of money they invest whereas a LLC (Limited Liability Private/Public Company) is a tightly held
business entity that incorporates the qualities of a corporation and a partnership".
In line of above statement clearly elaborate the difference between LLP and LLC.
ANSWER
Distinction between Limited Liability Partnership (LLP) and Limited Liability Company (LLC)

S.N Basis LLP Limited Liability Company (LLC)

o.
1. Regulating Act The LLP Act, 2008. The Companies Act, 2013.
2. Members/ Partners The persons who contribute to LLP The persons who invest the money in the
are known as partners of the LLP. shares are known as members of the
company.
3. Internal governance The internal governance structure The internal governance structure of a
structure of a LLP is governed by agreement company is regulated by statute (i.e.,
between the partners. Companies Act, 2013) read with its
Memorandum of Association and Articles
of Association.

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4. Name Name of the LLP to contain the Name of the public company to contain the
word “Limited Liability word “limited” and Pvt. Co. to contain the
partnership” or “LLP” as suffix. word “Private limited” as suffix.
5. No. of members/ Minimum – 2 partners Maximum – Private company: Minimum – 2 members
partners No such limit on the partners in Maximum 200 members Public company:
the Act. The partners of the LLP Minimum – 7 members Maximum – No such
can be individuals/or body limit on the members. Members can be
corporate through the nominees. organizations, trusts, another business
form or individuals.
6. Liability of members/ Liability of a partners is limited to Liability of a member is limited to the
partners the extent of agreed contribution. amount unpaid on the shares held by them.
7. Management The business of the LLP managed The affairs of the company are managed
by the partners including the by board of directors elected by the
designated partners authorized in shareholders.
the agreement.
8. Minimum number 2 designated partners. Pvt. Co. – 2 directors Public co. – 3
of directors
directors/designated
partners

QUESTION NO 27 PYQ May 2023

Discuss the liabilities of Limited Liability Partnership (LLP) and its partners in case of fraud as per the
provisions of the Limited Liability Partnership Act, 2008.
ANSWER
Unlimited liability in case of fraud (Section 30 of the Limited Liability Partnership Act, 2008):
(1) In case of fraud:
⚫ In the event of an act carried out by a LLP, or any of its partners,
⚫ with intent to defraud creditors of the LLP or any other person, or for any fraudulent purpose,
⚫ the liability of the LLP and partners who acted with intent to defraud creditors or for any fraudulent purpose,
⚫ shall be unlimited for all or any of the debts or other liabilities of the LLP.
However, in case any such act is carried out by a partner, the LLP is liable to the same extent as the partner,
unless it is established by the LLP that such act was without the knowledge or the authority of the LLP.

(2) Punishment: Where any business is carried on with such intent or for such purpose as mentioned in sub-
section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid
shall be punishable with imprisonment for a term up to 5 years and with fine which shall not be less than ` 50,000,
but which may extend to ` 5 Lakhs.

(3) Compensations on commission of fraud: Where a LLP or any partner or designated partner or employee of
such LLP has conducted the affairs of the LLP in a fraudulent manner, then without prejudice to any criminal
proceedings which may arise under any law for the time being in force, the LLP and any such partner or designated
partner or employee shall be liable to pay compensation to any person who has suffered any loss or damage by
reason of such conduct. However, such LLP shall not be liable if any such partner or designated partner or
employee has acted fraudulently without knowledge of the LLP.

QUESTION NO 28 PYQ Nov 2023

Explain the provisions relating to the registration of changes in partners under the Limited Liability
Partnership Act, 2008.
ANSWER

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Registration of changes in partners (Section 25 of the Limited Liability Partnership Act, 2008):
(1) Every partner shall inform the LLP of any change in his name or address within a period of 15 days of such
change.

(2) A LLP shall—

(a) where a person becomes or ceases to be a partner, file a notice with the Registrar within 30 days from
the date he becomes or ceases to be a partner; and
(b) where there is any change in the name or address of a partner, file a notice with the Registrar within 30
days of such change.

(3) A notice filed with the Registrar under sub-section (2)—

(a) shall be in such form and accompanied by such fees as may be prescribed;
(b) shall be signed by the designated partner of the LLP and authenticated in a manner as may be prescribed;
and
(c) if it relates to an incoming partner, shall contain a statement by such partner that he consents to
becoming a partner, signed by him and authenticated in the manner as may be prescribed.

(4) If the LLP contravenes the provisions of sub-section (2) as regards intimation to the Registrar, the LLP and
its every designated partner shall be liable to a penalty of
` 10,000.

(5) If the contravention referred to in sub-section (1) is made by any partner of the LLP, such partner shall be
liable to a penalty of ` 10,000.

(6) Any person who ceases to be a partner of a LLP may himself file with the Registrar the notice referred to in
sub-section (3) if he has reasonable cause to believe that the LLP may not file the notice with the Registrar and
in case of any such notice filed by a partner, the Registrar shall obtain a confirmation to this effect from the
LLP unless the LLP has also filed such notice.

However, where no confirmation is given by the LLP within 15 days, the registrar shall register the notice made
by a person ceasing to be a partner under this section.

QUESTION NO 29 PYQ May 2024

A LLP is a new form of legal business entity with limited liability. It's an alternative corporate business
vehicle that only gives the benefits of limited liability at low compliance cost but allows its partners the
flexibility of organizing their internal structure as a traditional partnership. Keeping in view of above,
define the following characteristics of LLP.
(i) Body Corporate
(ii) Mutual Agency
(iii) Foreign LLPs
(iv) Artificial legal person
ANSWER
Body corporate: Section 2(1)(d) of the LLP Act, 2008 provides that a LLP is a body corporate formed and
incorporated under this Act and is a legal entity separate from that of its partners and shall have perpetual
succession. Therefore, any change in the partners of a LLP shall not affect the existence, rights or liabilities of
the LLP.

Section 3 of LLP Act, 2008, provides that a LLP is a body corporate formed and incorporated under this Act
and is a legal entity separate from that of its partners.

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Mutual Agency: No partner is liable on account of the independent or un-authorized actions of other partners,
thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions
or misconduct. In other words, all partners will be the agents of the LLP alone. No one partner can bind the other
partner by his acts.

Foreign LLPs: Section 2(1)(m) defines foreign limited liability partnership “as a limited liability partnership
formed, incorporated, or registered outside India which established as place of business within India”. Foreign
LLP can become a partner in an Indian LLP.

Artificial Legal Person: A LLP is an artificial legal person because it is created by a legal process and is clothed
with all rights of an individual. It can do everything which any natural person can do, except of course that, it
cannot be sent to jail, cannot take an oath, cannot marry or get divorce nor can it practice a learned profession
like CA or Medicine. A LLP is invisible, intangible, immortal (it can be dissolved by law alone) but not fictitious
because it really exists.

QUESTION NO 30 Study Material

“LLP is an alternative corporate business form that gives the benefits of
limited liability of a company and the flexibility of a partnership”. Explain.
ANSWER
LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the
flexibility of a partnership

Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the agent of the LLP, but
not of other partners. The liability of the partners will be limited to their agreed contribution in the LLP, while
the LLP itself will be liable for the full extent of its assets.

Flexibility of a partnership: The LLP allows its members the flexibility of organizing their internal structure
as a partnership based on a mutually arrived agreement. The LLP form enables entrepreneurs, professionals
and enterprises providing services of any kind or engaged in scientific and technical disciplines, to form
commercially efficient vehicles suited to their requirements. Owing to flexibility in its structure and
operation, the LLP is a suitable vehicle for small enterprises and for investment by venture capital.

QUESTION NO 31 Study Material

Mr. Ankit Sharma wants to form a LLP taking him, his wife Mrs. Archika Sharma and One HUF as partners
for that. Whether this LLP can be incorporated under LLP Act, 2008? Explain.
ANSWER
Section 5 of Limited Liability Partnership Act, 2008 provides any individual or body corporate may be a partner
in an LLP. However, an individual shall not be capable of becoming a partner of a LLP, if—
(a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is pending.

Further, Section (2)(1)(e) provides that a Body Corporate it means a company as defined in ‘clause (20) of section
2 of the Companies Act, 2013 and includes—
(i) an LLP registered under this Act;
(ii) an LLP incorporated outside India; and
(iii) a company incorporated outside India,

but does not include—

(i) a corporation sole;

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(ii) a co-operative society registered under any law for the time being in force; and
(iii) any other body corporate (not being a company as defined in ‘clause (20) of section 2 of the Companies Act,
20132’ or a limited liability partnership as defined in this Act), which the Central Government may, by
notification in the Official Gazette, specify in this behalf.
Therefore, HUF is not covered in the definition of body corporate and cannot be partner in LLP.

QUESTION NO 32 Study Material

There is an LLP by the name Ram Infra Development LLP which has 4 partners namely Mr. Rahul, Mr.
Raheem, Mr. Kartar and Mr. Albert. Mr. Rahul and Mr. Albert are non – resident while other two are
resident. LLP wants to take Mr. Rahul and Mr. Raheem as Designated Partner. Explain in the light of
Limited Liability Partnership Act, 2008 whether LLP can do so?
ANSWER
According to Section 7 of LLP Act, 2008 every LLP shall have at least two designated partners who are
individuals and at least one of them shall be a resident in India. Further, explanation to the section provides, the
term “resident in India” means a person who has stayed in India for a period of not less than one hundred twenty
days during the financial year. Hence, in the given problem, besides Mr. Ram and Mr. Raheem, Mr. Albert should
also be designated partners.

QUESTION NO 33 Study Material

Mr. Mudit is the creditor of Devi Ram Food Circle LLP. He has a claim of
`10,00,000 against the LLP but the worth of the assets of LLP are only
`7,00,000. Now Mr. Mudit wants to make the partners of LLP personally liable for the deficiency of
`3,00,000. Whether by virtue of provisions of Limited Liability Act, 2008, Mr. Mudit can claim the
deficiency from the partners of Devi Ram Food Circle LLP?
ANSWER
A limited liability partnership is a body corporate formed and incorporated under this Act and is a legal entity
separate from that of its partners. The LLP itself will be liable for the full extent of its assets but the liability
of the partners will be limited. Creditors of LLP shall be the creditors of LLP alone. In other words, creditors of
LLP cannot claim from partners. The liability of the partners will be limited to their agreed contribution in the
LLP. Hence the creditors of Devi Ram Food Circle LLP are the creditors of Devi Ram Food Circle LLP only. Partners
of LLP are not personally liable towards creditors. Mr. Mudit can not claim his deficiency of ` 3,00,000 from the
partners of Devi Ram Food Circle LLP.

QUESTION NO 34 Study Material

M/s Vardhman Steels LLP was incorporated on 01.09.2022. On 01.01.2023, one partner of a partnership
firm named M/s Vardhimaan Steels is registered with Indian Partnership Act, 1932 since 01.01.2000
requested ROC that as the name of LLP is nearly resembles with the name of already registered partnership
firm, the name of LLP should be changed. Explain whether M/s Vardhman Steels LLP is liable to change its
name under the provisions of Limited Liability Act, 2008?
ANSWER
Section 15 of LLP Act, 2008 provides no LLP shall be registered by a name which, in the opinion of the Central
Government is—
(a) undesirable; or
(b) identical or too nearly resembles to that of any other ‘LLP or a company or a registered trade mark of any
other person under the Trade Marks Act, 1999’.
Further, section 17 provides, if the name of LLP is identical with or too nearly resembles to-
(a) that of any other LLP or a company; or
(b) a registered trade mark of a proprietor under the Trade Marks Act, 1999

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then on an application of such LLP or proprietor referred to in clauses (a) and (b) respectively or a company, the
CG may direct that such LLP to change its name within a period of 3 months from the date of issue of such
direction.
Following the above provisions, LLP need not change its name if its name resembles with the name of a partnership
firm. These provisions are applicable only in case where name is resembles with LLP, company or a registered
trade mark of a proprietor.

Hence, M/s Vardhman Steels LLP need not change its name even it resembles with the name of partnership
firm.

QUESTION NO 35 Study Material

Kanik, Priyansh, Abhinav and Bhawna were partners in Singh Jain & Associates LLP. Abhinav resigned from
the firm w.e.f. 01.11.2022 but this was not informed to ROC by LLP or Abhinav. Whether Abhinav will
still be liable for the loss of firm of the transactions entered after 01.11.2022?
ANSWER
According to section 24(3), where a person has ceased to be a partner of a LLP (hereinafter referred to as
“former partner”), the former partner is to be regarded (in relation to any person dealing with the LLP) as still
being a partner of the LLP unless—

(a) the person has notice that the former partner has ceased to be a partner of the LLP; or
(b) notice that the former partner has ceased to be a partner of the LLP has been delivered to the Registrar.

Hence, by virtue of the above provisions, as no notice of resignation was given to ROC, Abhinav will still be
liable for the loss of firm of the transactions entered after 01.11.2022.

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