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Limited Liability Partnership Act 2008-CA Foundation Notes

Limited Liability Partnership Act 2008-BUSINESS LAWS – CA Foundation, CPT notes, PDF

This article is about the Limited Liability Partnership Act 2008-BUSINESS LAWS for CA foundation CPT students. we also provide PDF file at the end.

limited liability partnership act

limited liability partnership act

What we will study in this chapter:

CHAPTER
4The Limited Liability
Partnership Act, 2008

 

Self Study Questions

Q.1: What do you understand by limited liability partnership?

Answer: ‘

  • Limited Liability Partnership (LLP) Act was passed by parliament on 12th December, 2008 and assent by President was given on 7th January, 2009.
  • It has 81 Sections and 4 Schedules

Schedule 1 – Mutual rights and duties of partners and partnership in absence of agreement. Schedule 2 – Conversion of Firm of LLP.

Schedule 3 – Conversion of Private Ltd. to LLP.

Schedule 4 – Conversion of Public Ltd. to LLP.

  • Partnership Act is not applicable to LLP form of business.
  1. Limited Liability Partnership – Meaning and Concept: Meaning*
  • Is a new form of business with limited liability.
  • It is a mind way between a partnership firm and Private Limited Company.
  • It contains elements of ‘body corporate’ and ‘partnership’ form of business.

Q.2: What are the Characteristics/Salient Features of a Limited Liability Partnership?

Answer:

  • It is a body corporate.
  • It has perpetual succession.
  • Separate Legal Entity.
  • Mutual Agency between partner and LLP only.
  • Rights and duties as per agreement.
  • Artificial legal person.
  • Common seal.
  • Limited liability of partners.
  • Designated Partner is responsible for legal compliances.
  • Must have minimum 2 individual partner and maximum no limit.
  • LLP cannot be formed for charitable and non-economic purpose.
  • Can be investigated by Central Government through appointment of competence authority,
  • Compromise, arrangements will be as per LLP Act, 2008.
  • Forms to be e-file on the portal of www.mca.gov.in using digital signature.
  • LLP formed, incorporated, or registered outside India having place of business in India is called Foreign LLP. It can become a partner in an Indian LLP.

Q.3: How many Advantages of Limited Liability Partnership (LLP) are there?

Answer:

  • Easy formation/dissolution.
  • Limited Liability of Partners.
  • Less legal formalities.
  • Flexible capital structure.
  • Low cost compliance.

Q.4: What are the steps followed for Incorporation of Limited Liability Partnership?

Answer:

Essential Elements for incorporation:

  • At least two designated partners.
  • Registered office in India along with utility bill as proof.
  • Designated Partners must be individuals.
  • One of them must be resident in India.
  • Designated Partner must have DPIN i.e. Designated Partner Identification Number which is allotted by MLA.
  • LLP Agreement consisting all rights and duties of partners.
  • In the absence of LLP Agreement provisions of Schedule First of LLP Act, 2008.
  • Name of LLP form of business.

Process: -i

Step 1: Elect member and designed among them at least two designated partners.

Step 2i Obtain DPIN of Designated Partners and Digital Signature Certificate (DSC) to sign e-form.

Step 3: Fill e-form Limited Liability Partnership-1 for reservation of name (upto 6 choices can be indicated).

Step 4: Once LLP-1 is approved, fill LLP-2 giving details of all partners along with Designated Partners who have consented to be partners.

Step 5: Draft LLP Agreement and file with registrar in E-form LLP-3 within 30 days of incorporation of LLP.

Q.5: Distinction between Limited Liability Partnership and Partnership

Firm.

Answer:

Limited Liability PartnershipPartnership Firm
It is governed by Limited Liability Partnership Act, 2008.

It is a body corporate.

Registration is mandatory. Separate legal entity with perpetual succession.

Limited Liability.

Its jurisdiction is under Central Government.

Working Partners are Designated Partner.

It must have its common seal.

No limitation on maximum number of partners.

Minor cannot be a partner.

It is governed by Indian Partnership Act, 1932.

It is not a body corporate. Registration is voluntary.

No separate legal entity and has no perpetual succession. Unlimited Liability.

Its jurisdiction is under State Government.

No distinction among partners, all are called partner.

Not required.

Maximum number of Partners can be upto 100 as per Companies Act.

Minor can be admitted as Partner to the benefits of partnership.

 

Q.6: Distinguish between Limited Liability Partnership and Limited Liability Company (LLC).

Answer:

Limited Liability PartnershipLimited Liability Company
it is governed by the Limited Liability Partnership Act, 2008.

Members are known as partners.

Name must end with Limited Liability Partnership Minimum number of member required as two.

No limitation on maximum number of members of Limited Liability Partnership.

Company must have minimum 2 designated partners for carrying on business activities.

It is governed by the Companies Act, 2013.

Members are known as shareholders.

Name must end with the word ‘Limited’ or ‘Private Limited’.

In the case of a Private company minimum 2 members are required, in case of Public Company minimum 7 members are required.

Maximum number of member in Private Company is 200 and in case of Public Company there is no limit.

Company must have directors to manage its business in case of Private Company minimum 2.

In case of Public Company minimum 3.

Short Practice Questions

  1. What do you mean by limited liability partnership. Give its characteristics?
  2. List out the process of incorporation of LLP.
  3. Differentiate between:

(a) LLP and LLC

(b) LLP and Partnership firm.

Descriptive Questions

Past Year Questions and Answers

2018 – May [2] (b) What are the essential elements to form a LLP in India as per the LLP Act, 2008? ‘      (5 marks)

Answer:

Limited Liability Partnership (LLP) is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. Thus, it is a hybrid between a company and a partnership. Essential Elements to in Corporate LLP:

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

(i) To complete and submit for incorporation documents with Registrar electronically.

(ii) To have atleast two partner for incorporation (whether individual or body corporate).

(iii) To have a registered office in India to which all communication will be made.

(iv) To appoint minimum two individuals as designated partners who will be responsible for number of duties. Atleast one of them should be a resident in India.

(v) Designated partner (s) should hold a Designated Partner Identification Number (DPIN) allotted by MCA.

(vi) To execute a partnership deed/agreement between and partner inter- se or between the LLP and its partner.

(vii) Decide upon LLP name.

LLP are body corporate and hence must be registered with Registrar of LLP.

2018 – Nov [2] (b) Explain the essential elements to incorporate a Limited Liability Partnership and the steps involved therein under the LLP Act, 2008.

(5 marks)

Answer:

The essential elements to incorporate LLP are:

(i) To complete and submit an incorporation document in the form prescribed with the registrar electronically;

(ii) To have at least two partners for the incorporation of LLP (individual or body corporate);

(iii) To have a 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 a resident in India.

(v) A person or nominee of body corporate intending to be appointed as designated partner of LLF* should hold a Designated Partner Identification Number (DPIN) allotted by MCA.

(vi) To execute a partnership agreement inter se or between the LLP and its partners. In the absence of any agreement the provisions as set out •in first schedule of the LLP Act, 2008 will be applied.

(vii) LLP Name

Limited liability Partnerships are bodies corporate and must be registered with the Registrar of LLP after following the provisions specified in the LLP Act.

2019 – June [2] (b)“LLP is an alternative corporate business form that gives

the benefits of limited liability of a company and the flexibility of a partnership”. Explain. (5 marks)

Answer:

A 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 organizing their internal structure as a traditional partnership. The LLP is a separate legal entity and, while the LLP itself will be liable for the full extent of its assets, the liability of the partners will be limited.

LLP 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. Owing to its flexibility in its structure and operation, the LLP is a suitable vehicle for small enterprise and for investment by venture capital.

LLP is a hybrid between a company and partnership:

Some features/advantages of LLP are:

  1. It is organized and operates on the basis of agreement.
  2. It provides flexibility without imposing detailed legal and procedural requirements.
  3. Easy to form.
  4. All partners enjoy limited liability.
  5. It has a flexible capital structure.
  6. It is easy to dissolve.

*This article contains all topics about the limited Liability Partnership Act 2008-BUSINESS LAWS.

For notes on all CA foundation topics, you can visit this article CA foundation note

 

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