LIMITED LIABILITY PARTNERSHIP ACT, 2008

The LLP Act, 2008 has 81 sections (of which section 81 is now omitted with effect from 1st April 2022) and 4
schedules
The First Schedule - deals with mutual rights and duties of partners and limited liability partnership and its
partners where there is absence of a formal agreement amongst them.

The Second Schedule - deals with conversion of a firm into LLP.

The Third Schedule - deals with conversion of a private company into LLP.

The Fourth Schedule - deals with conversion of unlisted public company into LLP.

Sec 2 - Definitions

Sec 2 (1) (d) – Body Corporate

It means a company as defined in clause (20) of section 2 of the Companies Act, 2013 a includes

(i) a LLP registered under this Act;

(ii) a LLP incorporated outside India; and

(iii) a company incorporated outside India,

but does not include -

(i) a corporation sole;
(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 or a limited liability partnership), which the Central
Government may, by notification in the Official Gazette, specify in this behalf.

Sec 2 (1) (e) – Business

Business includes every trade, profession, service and occupation except any activity which the Central Government
may, by notification, exclude.

Sec 2 (1) (l) – Financial Year

Financial year in relation to a LLP, means the period from the 1st day of April of a year to the 31st day of March of
the following year.
However, in the case of a LLP incorporated after the 30th day of September of a year, the financial year may
end on the 31st day of March of the year next following that year.

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Sec 2 (1) (m) – Foreign LLP

It means a LLP formed, incorporated or registered outside India which establishes a place of business within India.

Sec 2 (1) (p) – Name

In relation to a partner of a limited liability partnership, means—

 if an individual, his forename, middle name and surname; and

 if a body corporate, its registered name;

Sec 2 (1) (ta) – Small LLP

It means a limited liability partnership—

(i) the contribution of which, does not exceed 25 lakh rupees and
(ii) the turnover of which, as per the Statement of Accounts and Solvency for the immediately preceding
financial year, does not exceed 40 lakh rupees or

Characteristics of an LLP

 LLP is a body corporate: Section 2(1)(d) of the Act provides that a LLP is a body corporate.
Section 3 of the LLP Act provides that LLP 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.
 Perpetual Succession: The LLP can continue its existence irrespective of changes in partners. Death,
insanity, retirement or insolvency of partners has no impact on the existence of LLP.
 Separate Legal Entity: Section 3 of LLP Act 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. The LLP is liable to the full extent of its
assets but liability of the partners is limited to their agreed contribution in the LLP. In other words, creditors
of LLP shall be the creditors of LLP alone.
 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.
 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.
 LLP Agreement: Mutual rights and duties of the partners within a LLP are governed by an agreement
between the partners. In the absence of any such agreement, the mutual rights and duties shall be
governed by Schedule I of the LLP Act, 2008.

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  Common Seal: A LLP being an artificial person can act through its partners and designated partners. LLP
may have a common seal, if it decides to have one [Section 14(c)]. Thus, it is not mandatory for a LLP to
have a common seal.
 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). The liability of the partners will be limited to their agreed contribution
in the LLP. Such contribution may be of tangible or intangible nature or both.
 Business for Profit Only: The essential requirement for forming LLP is carrying on a lawful business with
a view to earn profit. Thus, LLP cannot be formed for charitable or non-economic purpose.

Advantages of an LLP
LLP form is a form of business model which:
1. Is organised and operates on the basis of an agreement.
2. Provides flexibility without imposing detailed legal and procedural requirements
3. Easy to form.
4. All partners enjoy limited liability.
5. Easy to dissolve

Sec 5 - Partners

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.

The following persons can become partner in LLP:

 Individuals (Resident Indians including NRI & Overseas Citizen of India as well as foreign nationals)

 Limited Liability Partnerships

 Companies (including foreign companies)

 Foreign Limited Liability Partnerships*

 Limited Liability Partnerships incorporated outside India

 Foreign Companies.

Co-operative society and corporation sole cannot become partner in a LLP.

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Sec 6 – Minimum number of partners

(i) Every LLP shall have at least two partners.

(ii) If at any time the number of partners of a LLP is reduced below two and the LLP carries on business for
more than six months while the number is so reduced, the person, who is the only partner of the LLP that it
so carries on business after those six months and has the knowledge of the fact that it is carrying on
business with him alone, shall be liable personally for the obligations of the LLP after 6 months.

Sec 7 – Designated Partners

 Every LLP shall have at least two designated partners who are individuals and at least one of them shall be
a resident in India
Provided, 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.
 If the incorporation document
(a) specifies who are to be designated partners, such persons shall be designated partners on
incorporation; or
(b) states that each of the partners from time to time of LLP is to be designated partners, every partner
shall be a designated partner;
 An individual shall not become a designated partner in any LLP unless he has given his prior consent to act
as such to the LLP in Form 9.
 Every LLP shall file with the Registrar the particulars of every individual who has given his consent to act as
designated partners within 30 days of his appointment.
 Every designated partner of the LLP shall obtain a Designated Partner Identification Number (DPIN) from
the Central Government.

Liabilities of a designated partner

Unless expressly provided otherwise in this Act, a designated partner shall be;

(a) responsible for the doing of all acts, matters and things as are required to be done by the limited liability
partnership in respect of compliance of the provisions of this Act including filing of any document, return,
statement.
(b) Liable to all penalties imposed on the limited liability partnership for any contravention of those provisions

Casual Vacancy of a designated partner

A limited liability partnership may appoint a designated partner within 30 days of a vacancy arising for any reason,

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provided that if no designated partner is appointed, or if at any time there is only one designated partner, each
partner shall be deemed to be a designated partner.

Sec 11 - Incorporation of LLP

The most important document needed for registration is the incorporation document.
(1) For a LLP to be incorporated:
(a) two or more persons associated for carrying on a lawful business with a view to earn profit shall subscribe
their names to an incorporation document;
(b) the incorporation document shall be filed in such manner and with such fees, as may be prescribed with the
Registrar of the State in which the registered office of the LLP is to be situated (Incorporation documents
are now processed electronically by Registrar, Central Registration Centre since 2nd October 2018); and
(c) Statement to be filed:
there shall be filed along with the incorporation document, a statement in the prescribed form:
 made by either an advocate, or a Company Secretary or a Chartered Accountant or a Cost Accountant, who
is engaged in the formation of the LLP and
 by anyone who subscribed his name to the incorporation document,
that all the requirements of this Act and the rules made thereunder have been complied with in respect of
incorporation and matters precedent and incidental thereto.

(1) The incorporation document shall -

(a) be in a form as may be prescribed;
(b) state the name of the LLP;
(c) state the proposed business of the LLP;
(d) state the address of the registered office of the LLP;
(e) state the name and address of each of the persons who are to be partners of the LLP on incorporation;
(f) state the name and address of the persons who are to be designated partners of the LLP on incorporation;
(g) contain such other information concerning the proposed LLP as may be prescribed.
(2) If a person makes a statement as discussed above which he -
 knows to be false; or
 does not believe to be true,
shall be punishable (Penalty for false declaration)
 with imprisonment for a term which may extend to 2 years
and
 with fine which shall not be less than Rs. 10,000 but which may extend to Rs. 5 Lakhs.

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Sec 12 - Incorporation by registration
(1) When the requirements imposed of section 11 have been complied with, the Registrar shall retain the
incorporation document and, 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 certificate issued under clause (b) of sub-section (1) shall be signed by the Registrar and authenticated by
his official seal.
(3) The certificate shall be conclusive evidence that the LLP is incorporated by the name specified therein.

Sec 13 – Registered Office of LLP

(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 or by
registered post or by any other manner, at the registered office and any other address specifically declared
by the LLP for the purpose.
(iii) A LLP may change the place of its registered office and file the notice of such change with the Registrar.
(iv) If the LLP contravenes any provisions of this section, the LLP and its every partner shall be punishable with
penalty of rs.500 per day subject to maximum rs.50,000.

Sec 14 – Effect of Registration

On Registration, LLP shall by its name, be capable of -
(i) Suing and being sued;
(ii) Acquiring, owning, holding and developing or disposing of property, whether movable or immovable,
tangible or intangible;
(iii) Having a common seal, if it decides to have one; and
(iv) Doing and suffering other acts and things as bodies corporate may lawfully do and suffer.

Sec 15 – Name
(i) Every limited liability partnership shall have either the words “limited liability partnership” or the acronym
“LLP” as the last words of its name.
(ii) No LLP shall be registered by a name which, in the opinion of the Central Government is
 undesirable; or
 identical or too nearly resembles to that of any other LLP or a company or a registered trademark
any other person under the Trade Marks Act, 1999.

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Sec 16 – Reservation of Name
(i) A person may apply in such form and manner and accompanied by such fee as may be prescribed to the
Registrar for the reservation of a name set out in the application as;
 the name of a proposed LLP
 the name to which a LLP proposes to change its name
(ii)the Registrar may, if he is satisfied, that the name to be reserved is not one which may be rejected on any
ground referred to in sub-section (2) of section 15, reserve the name for a period of 3 months from the date of
intimation by the Registrar.

Sec 17 – Rectification of Name

If through inadvertence, or otherwise, the LLP, on its first registration or on its registration by new name, is
registered by a name which is identical with or too nearly resembles to
 that of any other LLP or a company or
 a registered trade mark of a proprietor under the Trade Marks Act, 1999

then on an application of such LLP or proprietor of trademark or a company, the CG may direct such LLP to change
its name or new name within a period of 3 months from the date of issue of such direction.
Provided that an application of the proprietor of the registered trademarks shall be maintainable within a period of
3 years from the date of incorporation or registration or change of name of the LLP.

Where an LLP changes its name, it shall within a period of 15 days from the date of such change, give notice of the
change to Registrar along with the order of the Central Government, who shall carry out necessary changes in the
certificate of incorporation and within 30 days of such change issue fresh certificate of incorporation.

If the LLP is in default in complying with any direction given under sub- section (1), the Central Government shall
allot a new name to the LLP and the Registrar shall enter the new name in the register of LLP.

Sec 24 – Cessation of Partnership Interest

(1) Retirement of a partner
A person may cease to be a partner of a LLP

in accordance with an in the absence of agreement,

agreement with the other by giving a notice in writing of
partners not less than 30 days to the
other partners

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(2) A person shall cease to be a partner of a LLP
(a) on his death or dissolution of the LLP
(b) if he is declared to be of unsound mind by a competent court; or
(c) if he has applied to be adjudged as an insolvent or declared as an insolvent

(3) Former partner continues to be partner unless

(a) the person has notice that (b) notice that the former
the former partner has ceased partner has ceased to be a
to be a partner of the LLP i.e partner of the LLP has been
3rd party knows of retirement delivered to the Registrar

(5) Where a partner of a LLP ceases to be a partner, the former partner or a person entitled to his share in
consequence of the death or insolvency of the former partner, shall be entitled to receive from the LLP

(a) an amount equal to the (b) his right to share in the

capital contribution of the accumulated profits, after the
former partner actually made deduction of accumulated
to the LLP losses

(6) A former partner or a person entitled to his share in consequence of the death or insolvency of the former
partner shall not have any right to interfere in the management of the LLP.

Sec 25 – Registration of changes

(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
(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

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(6) Any person who ceases to be a partner of a LLP may himself file with the Registrar 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 by
giving 15 days’ notice.

Sec 26 – Partner as agent

Every partner of a LLP is, for the purpose of the business of the LLP, the agent of the LLP, but not of other
partners.

Sec 27 – Extent of liability of LLP

(1) 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 (3rd party) knows that he has no authority or does not know him to be a partner of the LLP.
(2) 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. That is LLP is liable for wrongful act of partner in
ordinary course of business.
(3) An obligation of the LLP whether arising in contract or otherwise, shall be solely the obligation of the LLP..
(4) The liabilities of the LLP shall be met out of the property of the LLP.

Sec 28 – Extent of liability of Partner

(1) A partner is not personally liable, directly or indirectly for an obligation solely by reason of being a partner of
the LLP.
Sec 29 – Partner by holding out or Estoppel
(1) Any person;
 who by words spoken or written or by conduct
 represents himself, or knowingly permits himself to be represented to be a partner in a LLP
 is liable to any person
 who has on the faith of any such representation
 given credit to the LLP, whether the person representing himself or represented to be a partner does
or does not know that the representation has reached the person so giving credit.

(2) Where after a partner’s death the business is continued in the same LLP name, the continued use of that name
or of the deceased partner’s name shall not by itself make his legal representative or his estate liable for any act of
the LLP done after his death.

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Sec 30 – Unlimited Liability in case of fraud
(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.
(2) Where any business is carried on with such intent every person who was knowingly a party to the carrying on of
the business in the manner aforesaid shall be punishable with

(b) with fine which shall not be

(a) imprisonment for a term
less than Rs. 50,000 but which
which may extend to five years
may extend to Rs. 5 Lakhs

(3) 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.

Sec 31 – Whistle Blowing

(1) The Court or Tribunal may reduce or waive any penalty leviable against any partner or employee of a LLP, if
it is satisfied that;
 such partner or employee of an LLP has provided useful information during investigation of such LLP
or
 when any information given by any partner or employee leads to LLP or any partner or employee of
such LLP being convicted under this Act
(2) No partner or employee of any LLP may be
 discharged
 demoted
 suspended
 threatened
 harassed
or in any other manner discriminated against the terms and conditions of his LLP or employment merely because of
his providing information.

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Sec 32 – Form of contribution
(1) A contribution of a partner may consist of
 Tangible
 Movable
 Immovable
 intangible property
 other benefit to the limited liability partnership
 including money, promissory notes, other agreements to contribute cash or property and
 contracts for services performed or to be performed.

(2) The monetary value of contribution of each partner shall be accounted for and disclosed in the accounts of
the limited liability partnership.

Sec 34 – Maintenance of Books of Accounts & Audit

(1) The LLP shall maintain such proper books of account relating to its affairs for each year of its existence
 on cash basis or accrual basis
 according to double entry system of accounting

shall maintain the same at its registered office, for such 8 years.

(2) Statement of Account and Solvency

Every limited liability partnership shall file within 30 days from the end of 6 months of the end of FY the
Statement of Account and Solvency with the Registrar every year in such Form 8

(3) Audit

An LLP shall get it accounts audited if;

 If turnover of the LLP exceeds 40L or
 Contribution exceeds 25L

Penal Provisions

Any limited liability partnership which fails to comply with the provisions of sub-section (1), sub-section (2) and
sub-section (4)

LLP DP
Min Fine – Rs. 25,000 Min Fine – Rs. 10,000
Max Fine – Rs. 5 Lakhs Max Fine – Rs. 1 Lakhs

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Sec 35 – Annual Return
Every LLP shall file an annual return duly authenticated with the Registrar within 60 days of closure of its
financial year in Form 11.
If an LLP fails to file Annual return within the period of 30 days, then the LLP & its designated partners shall be
liable to Rs. 100 for each day during which the default continues subject to a maximum of

LLP – Rs. 1 Lakh DP – Rs. 50,000

Sec 36 – Any Person can inspect the documents filed by an LLP with registrar by paying such fees as
maybe determined by registrar

Sec 37 – Filing of false information

If in any return, statement or other document required by or for the purposes of any of the provisions of this Act,
any person makes a statement
 which is false in any material particular, knowing it to be false or
 which omits any material fact knowing it to be material

he shall be punishable with

Imprisonment for a term which AND Min Fine – Rs. 1 Lakh

may extend to 2 years Max Fine – Rs. 5 Lakhs

Sec 42 – Assignment & Transfer of Partner’s ownership interest (Share)

(1) The rights of a partner to a share of the profits and losses and to receive distributions in accordance with the
limited liability partnership agreement are transferable either wholly or in part (i.e can sell share)

(2) The transfer of any right by any partner does not by itself cause the disassociation of the partner or a
dissolution and winding up of the limited liability partnership (i.e he continues to remain a partner)

(3) Does not, entitle the transferee or assignee to participate in the management or conduct of the activities of
the limited liability partnership, or access information concerning the transactions of the limited liability
partnership.

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Sec 55 – Conversion from firm into LLP
A firm may convert into an LLP in accordance with the provisions of this Chapter and the Second Schedule.

Sec 56 – Conversion from Private Company into LLP

A private company may convert into an LLP in accordance with the provisions of this Chapter and the Third
Schedule.

Sec 57 – Conversion from Unlisted Public Company into LLP

An unlisted public company may convert into an LLP in accordance with the provisions of this Chapter and the
Fourth Schedule.

Sec 58 – Registration and effect of conversion

(1) The Registrar, on satisfying that a firm, private company or an unlisted public company, has complied with
the respective Schedules, register the documents submitted under such schedules and issue a certificate of
registration
(2) The LLP shall, within 15 days of the date of registration, inform the concerned Registrar of Firms or Registrar
of Companies, with which it was registered about the conversion and of the particulars of the LLP.
(3) Upon such conversion, the partners of the firm, the shareholders of private company or unlisted public
company, the LLP to which such firm or such company has converted, and the partners of the LLP shall be
bound by the respective Schedules.

Effect of Registration

(a) there shall be a LLP by the name specified in the certificate of registration registered under this Act
(b) all tangible (movable or immovable) and intangible property vested in the firm or the company, all assets,
interests, rights, privileges, liabilities, obligations relating to the firm or the company and the whole of the
undertaking shall be transferred to and shall vest in the limited liability partnership without further
assurance, act or deed.
(c) the firm or the company, as the case may be, shall be deemed to be dissolved and removed from the
records of the Registrar of Firms or Registrar of Companies

Sec 63 – Winding up and dissolution

The winding up of a LLP may be

OR
either voluntary by the Tribunal

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Sec 64 – Circumstances in which LLP may be wound up by Tribunal
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 has acted against the interests of the sovereignty and integrity of India, the security of the State
or public order;
(d) if the LLP has made a default in filing with the Registrar the Statement of Account and Solvency or
annual return for any 5 consecutive financial years; or
(e) if the Tribunal is of the opinion that it is just and equitable that the LLP be wound up

Form Index – LLP

Form Number Purpose
FiLLiP Form for Incorporation of LLP
Form 1 Application for reservation of new name in case of change of name
Form 2 Incorporation Document
Form 3 LLP Agreement
Notice of appointment, cessation, change in name/ address/designation of a
Form 4
designated partner or partner.
Form 8 Statement of Account & Solvency
Form 11 Annual Return
Form 15 Notice for change of place of registered office

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