ICAI Notes: The Limited Liability Partnership Act, 2008 | Corporate & Other Laws for CA Intermediate PDF Download

 Page 1


LEARNING OUTCOMES 
a
    
 
CHAPTER 
12 
 
THE LIMITED LIABILITY 
PARTNERSHIP ACT, 
2008 
 
 
 
 
At the end of this chapter, you will be able to: 
? Comprehend the meaning of the term ‘Limited Liability 
Partnership’, its need, scope and advantages 
? Know about the Incorporation of LLP, Partners and their 
relations, financial disclosures, conversions, winding up and 
dissolution. 
?
Differentiate between ‘Limited Liability Partnership’ and 
other forms of organization. 
 
 
  
© The Institute of Chartered Accountants of India
Page 2


LEARNING OUTCOMES 
a
    
 
CHAPTER 
12 
 
THE LIMITED LIABILITY 
PARTNERSHIP ACT, 
2008 
 
 
 
 
At the end of this chapter, you will be able to: 
? Comprehend the meaning of the term ‘Limited Liability 
Partnership’, its need, scope and advantages 
? Know about the Incorporation of LLP, Partners and their 
relations, financial disclosures, conversions, winding up and 
dissolution. 
?
Differentiate between ‘Limited Liability Partnership’ and 
other forms of organization. 
 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
12.2 
 
 
 
1. INTRODUCTION 
The Ministry of Law and Justice on 9
th
 January 2009 notified the Limited Liability 
Partnership Act, 2008. 
The Parliament passed the Limited Liability 
Partnership Bill on 12
th
 December, 2008 and the 
President of India has assented the Bill on 7
th
 
January, 2009 and called as the Limited Liability 
Partnership Act, 2008 (the “LLP Act, 2008”). 
This Act has been enacted to make provisions for the formation and regulation of 
Limited Liability Partnerships and for matters connected there with or incidental 
thereto.  
The LLP Act, 2008 has 81 sections (of which section 81 is now omitted with effect 
from 1
st
 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. 
LLP
Introduction
Incorporation
Partnership 
and Their 
Relations
Meaning 
and 
concept
Advantages Characteristics
Financial 
Disclosures
Winding 
up and 
dissolution
Differences 
with other 
form of 
organisation
CHAPTER OVERVIEW 
 
The LLP Act, 
2008 is 
applicable to 
the whole of 
India 
© The Institute of Chartered Accountants of India
Page 3


LEARNING OUTCOMES 
a
    
 
CHAPTER 
12 
 
THE LIMITED LIABILITY 
PARTNERSHIP ACT, 
2008 
 
 
 
 
At the end of this chapter, you will be able to: 
? Comprehend the meaning of the term ‘Limited Liability 
Partnership’, its need, scope and advantages 
? Know about the Incorporation of LLP, Partners and their 
relations, financial disclosures, conversions, winding up and 
dissolution. 
?
Differentiate between ‘Limited Liability Partnership’ and 
other forms of organization. 
 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
12.2 
 
 
 
1. INTRODUCTION 
The Ministry of Law and Justice on 9
th
 January 2009 notified the Limited Liability 
Partnership Act, 2008. 
The Parliament passed the Limited Liability 
Partnership Bill on 12
th
 December, 2008 and the 
President of India has assented the Bill on 7
th
 
January, 2009 and called as the Limited Liability 
Partnership Act, 2008 (the “LLP Act, 2008”). 
This Act has been enacted to make provisions for the formation and regulation of 
Limited Liability Partnerships and for matters connected there with or incidental 
thereto.  
The LLP Act, 2008 has 81 sections (of which section 81 is now omitted with effect 
from 1
st
 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. 
LLP
Introduction
Incorporation
Partnership 
and Their 
Relations
Meaning 
and 
concept
Advantages Characteristics
Financial 
Disclosures
Winding 
up and 
dissolution
Differences 
with other 
form of 
organisation
CHAPTER OVERVIEW 
 
The LLP Act, 
2008 is 
applicable to 
the whole of 
India 
© The Institute of Chartered Accountants of India
 
 
INTERPRETATION OF STATUTES 
a
    
 
12.3 
The Third Schedule deals with conversion of a private company into LLP. 
The Fourth Schedule deals with conversion of unlisted public company into LLP. 
The Ministry of Corporate Affairs and the Registrar of Companies (ROC) are 
entrusted with the task of administrating the LLP Act, 2008.  The Central 
Government has the authority to frame the Rules with regard to the LLP Act, 2008, 
and can amend them by notifications in the Official Gazette, from time to time. 
It is also to be noted that the Indian Partnership Act, 1932 is not applicable to 
LLPs. 
Note 
The Limited Liability Partnership Act, 2008 has been recently amended through 
the Limited Liability Partnership (Amendment) Act, 2021 dated 13
th
 August, 2021. 
Need of new form of Limited Liability Partnership 
The lawmakers envisaged the need for bringing out a new legislation for creation 
of the Limited Liability Partnership to meet with the contemporary growth of the 
Indian economy. A need has been felt for a new corporate form that would 
provide an alternative to the traditional partnership with 
unlimited personal liability on the one hand and the 
statute-based governance structure of the limited 
liability company on the other hand. In order to enable 
professional expertise and entrepreneurial initiative and to combine and operate 
in flexible, innovative and efficient manner, the LLP Act, 2008 was enacted.  
Thus, LLP as a form of business organization is an alternative corporate business 
vehicle. It provides the benefits of limited liability but 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. 
  
© The Institute of Chartered Accountants of India
Page 4


LEARNING OUTCOMES 
a
    
 
CHAPTER 
12 
 
THE LIMITED LIABILITY 
PARTNERSHIP ACT, 
2008 
 
 
 
 
At the end of this chapter, you will be able to: 
? Comprehend the meaning of the term ‘Limited Liability 
Partnership’, its need, scope and advantages 
? Know about the Incorporation of LLP, Partners and their 
relations, financial disclosures, conversions, winding up and 
dissolution. 
?
Differentiate between ‘Limited Liability Partnership’ and 
other forms of organization. 
 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
12.2 
 
 
 
1. INTRODUCTION 
The Ministry of Law and Justice on 9
th
 January 2009 notified the Limited Liability 
Partnership Act, 2008. 
The Parliament passed the Limited Liability 
Partnership Bill on 12
th
 December, 2008 and the 
President of India has assented the Bill on 7
th
 
January, 2009 and called as the Limited Liability 
Partnership Act, 2008 (the “LLP Act, 2008”). 
This Act has been enacted to make provisions for the formation and regulation of 
Limited Liability Partnerships and for matters connected there with or incidental 
thereto.  
The LLP Act, 2008 has 81 sections (of which section 81 is now omitted with effect 
from 1
st
 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. 
LLP
Introduction
Incorporation
Partnership 
and Their 
Relations
Meaning 
and 
concept
Advantages Characteristics
Financial 
Disclosures
Winding 
up and 
dissolution
Differences 
with other 
form of 
organisation
CHAPTER OVERVIEW 
 
The LLP Act, 
2008 is 
applicable to 
the whole of 
India 
© The Institute of Chartered Accountants of India
 
 
INTERPRETATION OF STATUTES 
a
    
 
12.3 
The Third Schedule deals with conversion of a private company into LLP. 
The Fourth Schedule deals with conversion of unlisted public company into LLP. 
The Ministry of Corporate Affairs and the Registrar of Companies (ROC) are 
entrusted with the task of administrating the LLP Act, 2008.  The Central 
Government has the authority to frame the Rules with regard to the LLP Act, 2008, 
and can amend them by notifications in the Official Gazette, from time to time. 
It is also to be noted that the Indian Partnership Act, 1932 is not applicable to 
LLPs. 
Note 
The Limited Liability Partnership Act, 2008 has been recently amended through 
the Limited Liability Partnership (Amendment) Act, 2021 dated 13
th
 August, 2021. 
Need of new form of Limited Liability Partnership 
The lawmakers envisaged the need for bringing out a new legislation for creation 
of the Limited Liability Partnership to meet with the contemporary growth of the 
Indian economy. A need has been felt for a new corporate form that would 
provide an alternative to the traditional partnership with 
unlimited personal liability on the one hand and the 
statute-based governance structure of the limited 
liability company on the other hand. In order to enable 
professional expertise and entrepreneurial initiative and to combine and operate 
in flexible, innovative and efficient manner, the LLP Act, 2008 was enacted.  
Thus, LLP as a form of business organization is an alternative corporate business 
vehicle. It provides the benefits of limited liability but 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. 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
12.4 
2. LIMITED LIABILITY PARTNERSHIP-  
MEANING AND CONCEPT 
Meaning: LLP is a new form of legal business entity with 
limited liability. It is an alternative corporate business 
vehicle that not only gives the benefits of limited liability at 
low compliance cost but allows its partners the flexibility of 
organising their internal structure as a traditional 
partnership. The LLP is a separate legal entity and, while the 
LLP itself will be liable to the full extent of its assets, the liability of the partners 
will be limited to the extent of their capital contribution. 
LLP as a separate legal entity and business organisation is an alternative 
corporate business form that gives the benefits of limited liability of a company 
and the flexibility of a partnership. 
Since LLP contains elements of both ‘a corporate structure’ as well as ‘a 
partnership firm structure’ LLP is called a hybrid between a company and a 
partnership. 
 
 
LLP
New form of legal 
business entity with 
limited liability
Alternative 
corporate 
business vehicle
Allows the 
partners the 
flexibility of 
organising their 
internal structure
LLP itself will be 
liable for the full 
extent of its 
assets 
Liability of 
partners will be 
limited to the 
extent of their 
capital 
contribution 
© The Institute of Chartered Accountants of India
Page 5


LEARNING OUTCOMES 
a
    
 
CHAPTER 
12 
 
THE LIMITED LIABILITY 
PARTNERSHIP ACT, 
2008 
 
 
 
 
At the end of this chapter, you will be able to: 
? Comprehend the meaning of the term ‘Limited Liability 
Partnership’, its need, scope and advantages 
? Know about the Incorporation of LLP, Partners and their 
relations, financial disclosures, conversions, winding up and 
dissolution. 
?
Differentiate between ‘Limited Liability Partnership’ and 
other forms of organization. 
 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
12.2 
 
 
 
1. INTRODUCTION 
The Ministry of Law and Justice on 9
th
 January 2009 notified the Limited Liability 
Partnership Act, 2008. 
The Parliament passed the Limited Liability 
Partnership Bill on 12
th
 December, 2008 and the 
President of India has assented the Bill on 7
th
 
January, 2009 and called as the Limited Liability 
Partnership Act, 2008 (the “LLP Act, 2008”). 
This Act has been enacted to make provisions for the formation and regulation of 
Limited Liability Partnerships and for matters connected there with or incidental 
thereto.  
The LLP Act, 2008 has 81 sections (of which section 81 is now omitted with effect 
from 1
st
 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. 
LLP
Introduction
Incorporation
Partnership 
and Their 
Relations
Meaning 
and 
concept
Advantages Characteristics
Financial 
Disclosures
Winding 
up and 
dissolution
Differences 
with other 
form of 
organisation
CHAPTER OVERVIEW 
 
The LLP Act, 
2008 is 
applicable to 
the whole of 
India 
© The Institute of Chartered Accountants of India
 
 
INTERPRETATION OF STATUTES 
a
    
 
12.3 
The Third Schedule deals with conversion of a private company into LLP. 
The Fourth Schedule deals with conversion of unlisted public company into LLP. 
The Ministry of Corporate Affairs and the Registrar of Companies (ROC) are 
entrusted with the task of administrating the LLP Act, 2008.  The Central 
Government has the authority to frame the Rules with regard to the LLP Act, 2008, 
and can amend them by notifications in the Official Gazette, from time to time. 
It is also to be noted that the Indian Partnership Act, 1932 is not applicable to 
LLPs. 
Note 
The Limited Liability Partnership Act, 2008 has been recently amended through 
the Limited Liability Partnership (Amendment) Act, 2021 dated 13
th
 August, 2021. 
Need of new form of Limited Liability Partnership 
The lawmakers envisaged the need for bringing out a new legislation for creation 
of the Limited Liability Partnership to meet with the contemporary growth of the 
Indian economy. A need has been felt for a new corporate form that would 
provide an alternative to the traditional partnership with 
unlimited personal liability on the one hand and the 
statute-based governance structure of the limited 
liability company on the other hand. In order to enable 
professional expertise and entrepreneurial initiative and to combine and operate 
in flexible, innovative and efficient manner, the LLP Act, 2008 was enacted.  
Thus, LLP as a form of business organization is an alternative corporate business 
vehicle. It provides the benefits of limited liability but 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. 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
12.4 
2. LIMITED LIABILITY PARTNERSHIP-  
MEANING AND CONCEPT 
Meaning: LLP is a new form of legal business entity with 
limited liability. It is an alternative corporate business 
vehicle that not only gives the benefits of limited liability at 
low compliance cost but allows its partners the flexibility of 
organising their internal structure as a traditional 
partnership. The LLP is a separate legal entity and, while the 
LLP itself will be liable to the full extent of its assets, the liability of the partners 
will be limited to the extent of their capital contribution. 
LLP as a separate legal entity and business organisation is an alternative 
corporate business form that gives the benefits of limited liability of a company 
and the flexibility of a partnership. 
Since LLP contains elements of both ‘a corporate structure’ as well as ‘a 
partnership firm structure’ LLP is called a hybrid between a company and a 
partnership. 
 
 
LLP
New form of legal 
business entity with 
limited liability
Alternative 
corporate 
business vehicle
Allows the 
partners the 
flexibility of 
organising their 
internal structure
LLP itself will be 
liable for the full 
extent of its 
assets 
Liability of 
partners will be 
limited to the 
extent of their 
capital 
contribution 
© The Institute of Chartered Accountants of India
 
 
INTERPRETATION OF STATUTES 
a
    
 
12.5 
DEFINITIONS 
1. Address [(Section 2(1)(a)]: “Address” in relation to a partner 
of a limited liability partnership, means— 
(i)  if an individual, his usual residential address; and  
(ii)  if a body corporate, the address of its registered office. 
2. Body Corporate [(Section 2(1)(d)]: It means a company as defined in 
clause (20) of section 2 of the Companies Act, 2013 and 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 as defined in clause 
(20) of section 2 of the Companies Act, 2013 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. 
 
3.  Business [Section 2(1)(e)]: “Business” includes every trade, profession, 
service and occupation except any activity which the Central Government 
may, by notification, exclude. 
 
 
Means
A company & includes - LLP , 
foreign LLP , foreign company, 
Does not include –
corporation sole; co-
operative society & any other 
body corporate notified by 
Central Government.
© The Institute of Chartered Accountants of India