Past Year Papers: The Limited Liability Partnership, 2008 | Business Laws for CA Foundation PDF Download

Q 1. (i) Limited Liability Partnership (LLP) gives the benefits of Limited Liability of a company on one hand and the flexibility of Partnership on the other. Discuss according to provisions of The Limited Liability Partnership Act, 2008.
(3 Marks, May 2025)

Answer: (i) LLP gives the benefits of limited liability of a company on one hand and the flexibility of a partnership on the other: 
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.  
(ii) Raju and his friend Anil have approached you to help them to form a LLP. The object of the proposed LLP is to run a charitable school which provides free education to the poor children. What would be your suggestion in accordance of provisions of The Limited Liability Partnership Act, 2008? 
(3 Marks, May 2025)

Answer: (ii)  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. 

In the instant case, Raju and Anil cannot form LLP to run a charitable school which provides free education to the poor children.

In view of above it is suggested to them that they can form a section 8 company for this purpose.

​Q 2. ​​Dyana and Bharti, newly qualified chartered accountants, wish to form a Limited Liability Partnership (LLP) to provide their professional services. They seek information about the provisions of The Limited Liability Partnership Act, 2008, specifically regarding the incorporation document. Additionally, they want to know whether the statement filed along with the incorporation document serves as sufficient evidence that all legal requirements for the incorporation of the LLP have been fulfilled. Explain these aspects to them.
(6 Marks, Jan 2025)

Answer: Incorporation document (Section 11 of the Limited Liability Partnership Act, 2008): 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 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; 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.  

(2) 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.   

(3) If a person makes a statement as discussed above which he-  
(a) knows to be false; or   
(b) does not believe to be true, shall be punishable 

• with imprisonment for a term which may extend to 2 years and   
• with fine which shall not be less than ` 10,000 but which may extend to ` 5 Lakhs. 

Incorporation by registration (Section 12- Sufficient evidence): As per section 12, the Registrar may accept the statement delivered under clause (c) of sub-section (1) of section 11 as sufficient evidence that the requirement imposed by clause (a) of the sub-section has been complied with.
In view of above, the statement filed along with the incorporation document serves as sufficient evidence that all legal requirements for the incorporation of the LLP have been fulfilled. 

Q 3. Referring to the provisions of the Limited Liability Partnership Act, 2008, answer the following:
(i) Under what circumstances a Limited Liability Partnership is compulsorily required to change its name? Also, explain the compliance requirement following the change of name and the consequences, if any, in case of default therein.
(4 Marks, Sep 2024)

Answer: (i) Change of name of LLP (Section 17 of Limited Liability Partnership Act, 2008):
(1)  Notwithstanding anything contained in sections 15 and 16, if through inadvertence or otherwise, a LLP, on its first registration or on its registration by a new body corporate, its registered name, is registered by a name which 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, as is likely to be mistaken for it,   
then on an application of such LLP or proprietor referred to in clauses (a) and (b) respectively or a company,   the Central Government may direct that such LLP to change its name or new name within a period of 3 months from the date of issue of such direction.

(2)  Where a LLP changes its name or obtains a new name under sub section (1), 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 in the certificate of incorporation, such LLP shall change its name in the LLP agreement. 

(3)  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 in such manner as may be prescribed and the Registrar shall enter the new name in the register of LLP in place of the old name and issue a fresh certificate of incorporation with new name, which the LLP shall use thereafter. 

Nothing contained in this sub-section shall prevent a LLP from subsequently changing its name in accordance with the provisions of section 16.

​(ii) What do you mean by a Small Limited Liability Partnership?
(2 Marks, Sep 2024)

Answer: (ii) Small Limited Liability Partnership [Section 2(1)(ta) of the Limited Liability Partnership 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. 

Q 4. 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
(6 Marks, Jun 2024)

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. 

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.