LLP Act, 2008: Frequently Asked Questions (FAQs)

No. The Indian Partnership Act, 1932 is a colonial era Act that only applies to traditional partnership firms in India and not the LLPs. The LLPs are governed by a separate Act known as Limited Liability Partnership Act, 2008, which is a comparatively modern piece of legislation.

This Act outlines key provisions relating to incorporation, functioning, management and regulation of LLPs in India. It also lays down rights, duties, responsibilities and liabilities of LLP partners.

Yes. An LLP is treated as a separate legal entity that is distinct from its partners in the eyes of the law. Because of this feature, it can own property, sign contracts and sue or be sued in its own name. An LLP continues to exist regardless of changes in its partners.

In an LLP, there is a minimum requirement of 2 partners. However, there is no upper limit on maximum number of partners it can have. Since there is no maximum limit, an LLP can add more partners as business grows, which can promote scalability as well as business expansion.

A natural person, i.e., an individual who may be an Indian or foreign national, and an artificial person, i.e., a body corporate such as a private company, public company or another LLP, whether Indian or foreign, can become a partner in an LLP. However, a minor or a Hindu Undivided Family cannot become a partner in an LLP.

A Designated Partner is an LLP partner who is responsible for core management and legal requirements of LLP. They ensure that LLP follows provisions ofLLP Act, 2008, and the rules notified from time to time.

These partners are also responsible for some of the most important filings for the LLP, including annual returns and applicable tax filings, such as LLP ITR filing and GST return filing, wherever applicable.

In an LLP, there must be at least one Designated Partner who is a Resident of India, as mandated under Section 7 of the Limited Liability Partnership Act, 2008. A Resident of India means an individual who has stayed in India for not less than 182 days during the immediately preceding one year. Every LLP must maintain this requirement at all times.

In an LLP, the liability of the partners is generally limited to the contribution they have agreed to make towards the business. In simple terms, their personal assets are generally protected from the debts and obligations of the LLP.

For example, if an LLP incurs a debt, the partners are generally not required to use their personal assets to repay it beyond their agreed contribution, subject to certain exceptions.

Although a Limited Liability Partnership, as the name suggests, provides limited liability protection to its partners, this protection does not apply in each and every situation out there. There are certain cases where liability of a partner can become unlimited. Under Section 30 of LLP Act, 2008, if an LLP or any of its partners acts with an intent to defraud creditors or for any fraudulent purpose, the liability of persons involved can become unlimited for debts and liabilities arising from such acts.

Partners can also be personally liable for their own wrongful acts, omissions or negligence. That said, they are generally not liable for unauthorized wrongful acts of other LLP partners.

Moreover, if number of partners falls below legal minimum of two designated partners and LLP continues to carry on business with only one partner for more than a period of six months, the sole partner may become personally liable for business obligations incurred during that period as long as they have knowledge of the fact.

No. Section 26 of LLP Act, 2008, makes it quite clear that every partner acts as an agent of LLP for the purpose of carrying on its business. However, a partner is not regarded as an agent of other partners.

Yes. An LLP Agreement is mandatory for every LLP registered in India under Section 23 of the LLP Act, 2008. It lays down clauses appertaining to rights and duties of partners and their relationship with LLP.

In many ways, it can be compared to Articles of Association of a company. The LLP is required to file details of its LLP Agreement with Registrar through Form 3 within 30 days of LLP incorporation.

For an LLP, having an LLP Agreement is absolutely mandatory. An LLP cannot function without having an agreement in place that governs the rights and duties of its partners.

However, the LLP Agreement may not always cover every possible matter and can sometimes be silent on a specific issue. In such cases, the provisions of the First Schedule of the LLP Act, 2008 tend to apply unless otherwise provided under the Act.

Yes. A partnership firm or an eligible company can generally be converted into an LLP. A partnership firm can be converted into an LLP by following provisions laid down under Second Schedule of the Act.

Similarly, a private company and an unlisted public company can be converted into an LLP by complying with requirements prescribed under Third Schedule and Fourth Schedule, respectively. Certain eligibility conditions also need to be fulfilled for such conversion.

No. For an LLP, a statutory audit is only mandatory if its annual turnover exceeds Rs. 40 lakh or its total capital contribution exceeds Rs. 25 lakh. So, if the LLP does not meet either of these thresholds, a statutory audit is not required to be conducted.

An LLP can be wound up voluntarily by its partners or compulsorily by an order of National Company Law Tribunal. In certain cases, a defunct LLP may also be removed from RoC’s register through striking-off process.