The Limited Liability Partnership Act, 2008 for CA Foundation
The Limited Liability Partnership Act, 2008: nature of an LLP, partners and designated partners, liability, incorporation, the LLP agreement, compliance and conversion.
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Practise The Limited Liability Partnership Act, 2008 free
What you'll learn
- Nature of an LLP and its partners
Explain the main features of an LLP and how it differs from a partnership and a company. - Incorporation, agreement and compliance
Know the incorporation steps, the role of the LLP agreement and the main filings.
Key formulas
| Annual return | Within 60 days of the end of the financial year |
|---|---|
| Statement of Account and Solvency | By 30 October |
| No agreement on a matter | First Schedule applies |
| Conversion | From a firm, private company or unlisted public company |
Concepts explained
Nature of an LLP
An LLP is a body corporate with a legal entity separate from its partners, combining a partnership's flexibility with a company's limited liability.
What it means
- Perpetual succession; can own property, sue and be sued in its own name.
- The Indian Partnership Act, 1932 doesn't apply (s.4).
- Name must end with 'LLP' or 'Limited Liability Partnership'.
- A firm, private company or unlisted public company can convert into an LLP.
- An LLP buys an office
Answer: The office belongs to the LLP, not the partners
- One partner dies
Answer: The LLP continues (perpetual succession)
Related terms
- Foreign LLP: LLP incorporated outside India with a place of business in India
- Small LLP: lower contribution and turnover, lighter compliance
Exam tip: Partnership flexibility inside, company protection outside.
Partners, designated partners and liability
An LLP needs at least two partners and two designated partners (one resident in India). Each partner's liability is limited to the agreed contribution.
What it means
- Designated partners are responsible for compliance and filings.
- Resident: stayed in India at least 120 days in the previous financial year.
- A partner isn't liable for another partner's independent or unauthorised acts.
- Below two partners for over six months: remaining partner personally liable (s.6).
- Partner commits fraud
Answer: That partner is personally liable; others are not
- LLP agreement silent on profit sharing
Answer: First Schedule: equal sharing
Related terms
- Contribution: money, property or services agreed to be brought in
- LLP agreement: written agreement filed within 30 days of incorporation
Exam tip: Remember 2-2-1: two partners, two designated partners, one resident.
LLP filings and compliance
An LLP is incorporated by filing with the Registrar and must keep books and file an annual return and a Statement of Account and Solvency every year.
What it means
- Incorporation document with the subscribers' statement; certificate of incorporation issued.
- LLP agreement filed within 30 days of incorporation.
- Annual return within 60 days of the end of the financial year.
- Statement of Account and Solvency by 30 October; audit required above prescribed turnover or contribution.
- Year ends 31 March
Answer: Annual return by 30 May
- Year ends 31 March
Answer: File by 30 October
Related terms
- Registrar: Registrar of Companies acts for LLPs
- Penalties: late fees and penalties for delays
Exam tip: 60 days for the return; six months plus 30 days for the solvency statement.
Memory tricks
Minimum 2 partners; at least 2 designated partners, 1 resident in India.
Annual return within 60 days; Statement of Account and Solvency by 30 Oct.
Below 2 partners for more than 6 months: remaining partner personally liable (s.6).
Try 3 CA Foundation-style questions
Q1. An LLP must file its annual return with the Registrar within
- 30 days of the end of the financial year
- 60 days of the end of the financial year
- 6 months of the end of the financial year
- 1 year
Show answer
Answer: (2) 60 days of the end of the financial year
Section 35: annual return within 60 days of closure of the financial year. The Statement of Account and Solvency is filed by 30 October.
Q2. The minimum number of partners required to form an LLP is
- 7
- 1
- 50
- 2
Show answer
Answer: (4) 2
Every LLP must have at least two partners; there is no upper limit.
Q3. If the number of partners of an LLP falls below two and it carries on business for more than six months, then the remaining partner
- becomes personally liable for its obligations during that period
- automatically becomes a sole proprietor
- is protected by limited liability throughout
- must convert it into a company
Show answer
Answer: (1) becomes personally liable for its obligations during that period
Section 6: a partner who knows the LLP has carried on business with only one partner for more than six months is personally liable for obligations incurred during that period.
Practise all 10 questions Free · explanations for every option · see where you go wrong