CH-4 – THE LIMITED LIABILITY PARTNERSHIP ACT,

2008

Learning Outcomes –

• Meaning and characteristics of Limited Liability Partnership

• Incorporation of LLP

• Partners and their relations

• Financial Disclosures

• Conversion into LLP

• Winding up and Dissolution of LLP

• Difference with other forms of organisations

Table of Contents

1. Introduction .......................................................................................................... 2
2. Limited Liability Partnership – Meaning and Concept ...................................... 3
3. Incorporation of LLP .......................................................................................... 11
4. Partners and their Relations ............................................................................. 15
5. Extent and Limitation of Liability of LLP and Partner ..................................... 18
6. Financial Disclosures .......................................................................................... 21
7. Conversion into LLP ........................................................................................... 23
8. Foreign LLP [Section 59] .................................................................................... 25
9. Winding Up and Dissolution .............................................................................. 25
10. Miscellaneous ..................................................................................................... 26
11. Differences with other Forms of Organisation ................................................ 29
12. Overview ............................................................................................................. 32

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Partnership Act, 2008
1. Introduction
9th January 2007
The Ministry of Law 7th January 2009
and Justice notified the President of India has
LLP Act, 2008 assented the LLP Bill

12th December 2008

The LLP Bill was
passed in the
Parliament

• The Limited Liability Partnership Act, 2008 is applicable to the whole of

India.

• The LLP Act, 2008 has 81 sections and 4 schedules.

First Schedule Mutual rights and duties of partners, as well limited

liability partnership and its partners where there is
absence of a formal agreement with respect to them.
Second Schedule Conversion of a firm into LLP.
Third Schedule Conversion of a private company into LLP.
Fourth Schedule 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.

The Indian Partnership Act, 1932 is not applicable to LLPs [Section 4]

• Need for new form of Limited Liability Partnership

In order to meet the contemporary growth of the Indian Economy, the

lawmakers contemplated the need for bringing out the new legislation for
creation of LLP.

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Partnership Act, 2008
 LLP is an alternative corporate business form that gives the benefits of
limited liability company and the flexibility of partnership. In order to
enable professional expertise and entrepreneurial initiative and combine,
organize and operate in flexible, innovative and efficient manner, the LLP Act,
2008 was enacted.

LLP as a form of business organization is an alternative corporate business

vehicle. LLPs allow for a partnership structure where each partner’s liability is
limited to the amount they put in the business. Owing to flexibility in its
structure and operation, LLP is a suitable vehicle for small enterprises and
for investment by venture capital. LLPs are common in professional business
like law firms, accounting firms, and wealth managers.

2. Limited Liability Partnership – Meaning and Concept

Section 2(n) of the Limited Liability Partnership Act, 2008 defines Limited
Liability Partnership –

“Limited Liability Partnership means a partnership formed and registered

under this Act”.

The LLP is a separate legal entity and,

while the LLP itself will be liable for the Since LLP contains elements of
full extent of its assets, the liability of both ‘a corporate structure’ as
the partners will be limited. well as ‘a partnership firm
structure’ LLP is called a hybrid
between a company and a
partnership.

Limited Liability Partnership

New form of Alternative Allows the partners LLP itself will Liability of
legal business corporate flexibility of be liable for partners
entity with business organising their the full extent will be
limited liability vehicle internal structure of its assets limited

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Partnership Act, 2008
Small Limited Liability Partnership – Section 2(1)(ta)

It means a limited liability partnership –

(i) Contribution of which does not exceed ₹ 25 lakh or such higher amount, not
exceeding ₹ 5 crore, as may be prescribed; and
(ii) Turnover of which as per Statement of Accounts and Solvency for
immediately preceding financial year, does not exceed ₹ 40 lakh or such
higher amount, not exceeding ₹ 50 crore, as may be prescribed; or
(iii) Which meets other requirements as may be prescribed, and fulfils such
terms and conditions as may be prescribed.

2.1 Partners [Section 5]

Section 2(1)(q) of the LLP Act, 2008 defines Partner –

“Partner, in relation to a LLP, means any person who becomes a partner in

the LLP in accordance with the LLP agreement”.

• Any individual or body corporate may be a partner in a LLP.

• However, an individual shall not be capable of becoming a partner of

a LLP, if –

a) he has been found to be of unsound mind by a Court of

competent jurisdiction and the finding is in force,

b) he is an undischarged insolvent, or

c) he has applied to be adjudicated as an insolvent and his

application is pending.

2.2 Minimum number of partners [Section 6]

• Every LLP shall have at least 2 partners.

• Person carrying on business with less than 2 partners –

If at any time the number of partners of a LLP is reduced below 2 and the
LLP carries on business for more than 6 months while the number is
so reduced, the person, who is the only partner of the LLP during such
time and has the knowledge of the fact that it is carrying on business with

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Partnership Act, 2008
 him alone, shall be liable personally for the obligations of the LLP
incurred during that period.

Section 2(1)(e) of the Limited Liability Partnership Act, 2008 defines business-

“Business” includes every trade, profession, service and occupation except any
activity which the Central Government may, by notification, exclude.

2.3 Designated partners [Section 7]

Section 2(1)(j) of the Limited Liability Partnership Act, 2008 defines

Designated Partner–

Any partner designated as such pursuant to section 7.

• Every LLP shall have at least 2 designated partners who are individuals
and at least one of them shall be a resident in India. [Section 7(1)]

• If in LLP, all the partners are bodies corporate or in which one or more
partners are individuals and bodies corporate, at least 2 individuals who
are partners of such LLP or nominees of such bodies corporate shall
act as designated partners.

• Resident in India – A person who has stayed in India for a period of not
less than 120 days during the financial year.

Example: There is an LLP by the name Indian Helicopters LLP having 5

partners namely Mr. A (Non-resident), Mr. B (Non-resident), Ms. C
(resident), Ms. D (resident) and Ms. E (resident).

In this case, at least 2 should be named as Designated Partner out of which

1 should be resident. Hence, if Mr. A and Mr. B are designated then it will
not serve the purpose. One of the designated partners should be there out
of Ms. C, Ms. D and Ms. E.

• Subject to the provisions of Sub-section(1),

➢ If the incorporation document,
▪ Specifies who are to be designated partners, such persons shall be
designated partners on incorporation; or

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Partnership Act, 2008
 ▪ States that each of the partners from time to time of LLP is to be
designated partner, every partner shall be a designated partner.
➢ Any partner may become a designated partner by and in accordance
with the LLP Agreement and a partner may cease to be a designated
partner in accordance with LLP agreement.

• An individual shall not become a designated partner in any limited liability

partnership unless he has given his prior consent to act as such to the
limited liability partnership in such form and manner as may be prescribed.

• Every limited liability partnership shall file with the Registrar the
particulars of every individual who has given his consent to act as
designated partner in such form and manner as may be prescribed within
thirty days of his appointment.

• An individual eligible to be a designated partner shall satisfy such

conditions and requirements as may be prescribed.

• Every designated partner of a limited liability partnership shall obtain a

Designated Partners Identification Number (DPIN) from the Central
Government and the provisions of sections 153 to 159 (both inclusive) of
the Companies Act, 2013 shall apply mutatis mutandis for the said purpose.

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Partnership Act, 2008
2.4 Characteristic of LLP

2.4.1 LLP is a body corporate

Section 3 of LLP Act 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.

Section 2(1)(d) of the LLP Act states that Body Corporate 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 Section 2(20)
of the Companies Act, 2013 or LLP as defined in this Act) which the Central
Government may, by notification in the Official Gazette, specify in this
behalf “.

2.4.2 Perpetual Succession

The LLP can continue its existence irrespective of changes in partners.

Death, insanity, retirement or insolvency of partners has no impact on the
existence of LLP.

2.4.3 Separate Legal Entity

The LLP as a separate legal entity, is liable to the full extent of its assets
but liability of the partners is limited to their agreed contribution in the
LLP. Creditors of LLP shall be the creditors of LLP alone.

2.4.4 Mutual Agency

Partners act as agents of the LLP but not of the other partners. No partner
is liable on account of the independent or un-authorized actions of

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Partnership Act, 2008
 other partners. Thus, all partners will be the agents of the LLP alone. No
one partner can bind the other partner by his acts.

2.4.5 LLP Agreement

• Mutual rights and duties of the partners within a LLP are governed by
an agreement between the partners.

• In the absence of any such agreement, the mutual rights and duties
shall be governed by the provisions of the LLP Act, 2008.

Section 2(1)(o) of the Limited Liability Partnership Act, 2008 defines Limited
Liability partnership agreement as –

“Any written agreement between the partners of the LLP or between the LLP
and its partners which determines the mutual rights and duties of the
partners and their rights and duties in relation to that LLP“.

2.4.6 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 (can be dissolved by law alone)

but not fictitious because it really exists.

2.4.7 Common Seal

• The LLP may have a common seal if it decides to have one [Section
14(c)]. Thus, it is not mandatory for a LLP to have a common seal.

• It shall remain under the custody of some responsible official and it shall
be affixed in the presence of at least 2 designated partners of the
LLP.

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Partnership Act, 2008
2.4.8 Limited Liability
This feature has encouraged
Liability of the partners will be
professionals like Engineering
limited to their agreed contribution
consultants, Legal Advisors and
in LLP. Such contribution may be of
Accounting Professionals to
tangible or intangible nature or both.
enter into business through LLP.
2.4.9 Management of Business

The partners in the LLP are entitled to manage the business of LLP. But only
the designated partners are responsible for legal compliances.

2.4.10 Minimum and Maximum number of Partners

• Every LLP shall have at least 2 partners and shall also have at least 2
individuals as designated partners, of whom at least one shall be
resident in India.

• There is no maximum limit on the partners in LLP.

2.4.11 Business for Profit Only

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.

2.4.12 Investigation

The Central Government shall have powers to investigate the affairs of an

LLP by appointment of competence authority for the purpose.

2.4.13 Compromise or Arrangement

Any compromise or agreements including merger and amalgamation of

LLPs shall be in accordance with the provisions of the LLP Act, 2008.

2.4.14 Conversion into LLP

A firm, private company, or an unlisted public company are allowed to

be converted into LLP in accordance with the provisions of LLP Act, 2008.

2.4.15 E-Filling of Documents

Every form or application of document required to be filed or delivered

under the act and rules made thereunder, shall be filed in computer
readable electronic form on its website www.mca.gov.in and

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Partnership Act, 2008
 authenticated by a partner or designated partner of LLP by the use of
electronic or digital signature.

2.4.16 Foreign LLPs

As per section 2(1)(m), “foreign limited liability partnership” means –

a limited liability partnership formed, incorporated, or registered outside

India which establishes a place of business within India.

• Foreign LLP can become a partner in an Indian LLP.

Characteristics of LLP

Body Limited Management

Foreign LLPs
Corporate Liability of Business

Perpetual No. of E-filing of

Common Seal
Succession Members documents

Separate Artificial Legal Business for Conversion

Legal Entity Person profit only into LLP

Compromise
Mutual LLP Investigation
or
Agency Agreement by CG
Arrangement

2.5 Advantages of LLP form

Organised Provides
All
and flexibility Flexible
partners
operates without Easy to Capital Easy to
enjoy
on the imposing legal form Structur dissolve
limited
basis of and procedural e
liability
agreement requirements

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Partnership Act, 2008
3. Incorporation of LLP

3.1 Incorporation document [Section 11]

1. For a LLP to be incorporated two or more persons associated for

carrying on a lawful business with a view to earn profit shall subscribe
their names to an incorporation document. [Sub-section 1(a)]

2. It 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. [Sub-section 1(b)]

3. Statement to be filed –

• Along with the incorporation document a statement in the prescribed

form shall be filed 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.

• The statement shall be made by –

o 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

o By anyone who subscribed his name to the incorporation

document. [Sub-section 1(c)]

4. The incorporation document shall be in a form as may be prescribed.

5. Contents of the Incorporation Document –

Name and
Address of the
Address of the
Name of the registered
proposed
LLP office of the
designated
LLP
partners

Name and
Proposed Such other
Address of
business of the information as
proposed
LLP prescribed
partners

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Partnership Act, 2008
 6. Penalty for false statement –

If a person makes a statement which he knows to be false or does not

believe to be true, shall be punishable with –

• Imprisonment for a term which may extend to 2 years and

• Fine which shall not be less than ₹ 10,000 but which may extend
to ₹ 5 lakhs.

3.2 Incorporation by registration [Section 12]

• Where the Incorporation Document has been filed and complies with the
requirements of Section 11 the Registrar shall retain the incorporation
document and, he shall, within a period of 14 days –

a) Register the incorporation document; and

b) Give a certificate, signed by the Registrar and authenticated by his

seal, that the LLP is incorporated by the name specified therein.

• The Registrar may accept the statement delivered u/s 11(1)(c) as

sufficient evidence that the requirement imposed by clause (a) of that
sub-section has been complied with.

• The certificate shall be conclusive evidence that the LLP is incorporated

by the name specified therein.

3.3 Registered office of LLP and change therein [Section 13]

1. Every LLP shall have a registered office to which all communications

and notices may be addressed and where they shall be received.

2. Serving documents on LLP or its partner or designated partner – A

document may be served on a LLP or a partner or designated partner
thereof –

• by sending it by post under a certificate of posting or by

registered post or by any other manner, as may be prescribed,

• at the registered office and any other address specifically declared

by the LLP for the purpose in such form and manner as may be
prescribed.

3. Change of Registered Office – A LLP may change the place of its

registered office and file the notice of such change with the Registrar
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Partnership Act, 2008
 in such form and manner and subject to such conditions as may be
prescribed and any such change shall take effect only upon such filing.

4. Punishment for contravention – If the LLP contravenes any provisions

of this section, the LLP and its every partner shall be liable to a penalty
of ₹ 500 per day during which the default continues, subject to maximum
of ₹ 50,000.

3.4 Effect of registration [Section 14]

On registration the LLP shall, by its name, be capable of -

Acquiring, owning, Doing and

Having a
holding and developing suffering such acts
common
Suing and or disposing of and things as
seal, if it
being sued property, whether bodies corporate
decides to
movable or immovable, may lawfully do
have one
tangible or intangible and suffer

3.5 Name [Section 15]

• Every LLP shall have either the words “Limited Liability Partnership” or
the acronym “LLP” as the last words of its name.

• No LLP shall be registered by a name which, in the opinion of the

Central Government is—

✓ Undesirable, or

✓ Identical or too nearly resembles to that of any other LLP or

company or a registered trademark of any other person under the
Trade Marks Act, 1999.

3.6 Reservation of name [Section 16]

• A person may apply in such form (e-Form 1) and manner and

accompanied by such fee as may be prescribed to the Registrar for the
reservation of a name set out in the application as –

a) The name of a proposed LLP; or

b) The name to which a LLP proposes to change its name.

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Partnership Act, 2008
 • Upon receipt of an application and on payment of the prescribed fee, the
Registrar may, if he is satisfied that the name to be reserved is not one
which may be rejected on any ground referred to in section 15, reserve
the name for a period of 3 months from the date of intimation by the
Registrar.

3.7 Change of name of LLP [Section 17]

• If through inadvertence or otherwise, a LLP on its first registration or on

its registration by a new body corporate, is registered by a name–

Identical with or too nearly resembles

➔ name of any other LLP or company, or

➔ 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 or a company,

the Central Government (CG) may direct such LLP to change its name.

• The LLP shall comply with such direction within 3 months from the date
of issue of such direction.

• An application of the proprietor of the registered trade mark shall be

maintainable within a period of 3 years from the date of incorporation or
registration or change of name of the LLP under this Act.

• Where LLP changes its name or obtains a new name, 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.

• If the LLP defaults in complying with direction of the CG, the CG shall allot
a new name to the LLP in such manner as may be prescribed and
Registrar shall enter the new name in the register of LLP and issue a fresh
Certificate of Incorporation.

• The LLP can subsequently change its name in accordance with the
provisions of Section 16.

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Partnership Act, 2008
3.8 Steps to incorporate LLP

Name Reservation
Incorporate LLP
Applicant shall file e-
Form 1 for LLP Agreement
File e-Form 2 for
ascertaining the
incorporating a new
availability and To be filed with the
LLP, containg details of
reservation of the Registrar in e-Form 3
proposed LLP, partners
name of the LLP. within 30 days of
and designated
incorporation.
partners and their
consent Mandatory u/s 23.

4. Partners and their Relations

4.1 Eligibility to be partners [Section 22]

• On the incorporation of a LLP, the persons who subscribed their

names to the incorporation document shall be its partners.

• Any other person may become a partner of the LLP by and in

accordance with the LLP agreement.

4.2 Relationship of partners [Section 23]

The mutual rights and duties of partners

of LLP and that of LLP and its partners
shall be governed by the LLP Agreement.

In the absence of agreement as to any

matter, such mutual rights and duties
shall be determined according to the
provisions of the First Schedule.

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Partnership Act, 2008
 • The LLP agreement and any changes, if any, made therein shall be
filed with the Registrar in such form, manner and accompanied by
such fees as may be prescribed.

• An agreement in writing made before the incorporation of a LLP

between the persons who subscribe their names to the incorporation
document may impose obligations on the LLP. However, such
agreement should be ratified by all the partners after the
incorporation of the LLP.

4.3 Cessation of partnership interest [Section 24]

1. A person may cease to be a partner of a LLP –

• In accordance with an agreement with the other partners or,

• In the absence of agreement with the other partners as to cessation

of being a partner, by giving a notice in writing of not less than 30
days to the other partners of his intention to resign as partner.

2. A person shall cease to be a partner of a LLP –

a. On his death or dissolution of the LLP; or

b. If he is declared to be of unsound mind by a competent court; or

c. If he has applied to be adjudged as an insolvent or declared as an

insolvent.

3. Where a person has ceased to be a partner of a LLP such partner (to be

called ‘former partner’) shall be regarded by a person dealing with the
LLP as still being a partner of the LLP unless –

✓ The person has notice that the former partner has ceased to be a
partner of the LLP; or

✓ Notice that the former partner has ceased to be a partner of the

LLP has been delivered to the Registrar.

4. Rights and liabilities of former partner –

• The cessation of a partner from the LLP does not by itself

discharge the partner from any obligation to the LLP or to the
other partners or to any other person which he incurred while
being a partner.

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Partnership Act, 2008
 • The former partner or a person entitled to his share in consequence
of the death or insolvency of the former partner, shall be entitled
to receive from the LLP –

✓ An amount equal to the capital contribution of the former

partner actually made to the LLP; and

✓ His right to share in the accumulated profits of the LLP, after

the deduction of accumulated losses, determined as at the
date the former partner ceased to be a partner.

• A former partner or a person entitled to his share in consequence

of the death or insolvency of the former partner shall not have any
right to interfere in the management of the LLP.

4.4 Registration of changes in partners [Section 25]

Partner to inform Changes in name within 30 days of

the LLP [Sec. 25(1)] or address such change

LLP to file notice Change in name or

within 30 days of
with Registrar address of a
such change
[Sec. 25(2)] partner

LLP to file notice Person becomes/

with Registrar ceases to be within 30 days
[Sec. 25(2)] partner

• A notice filed with the Registrar –

o Shall be in such form and accompanied by such fees as may be

prescribed,

o Shall be signed by the designated partner of the LLP and

authenticated in a manner as may be prescribed, and

o If it relates to an incoming partner, shall contain a statement

by such partner that he consents to becoming a partner,
signed by him and authenticated in the manner as may be
prescribed.
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Partnership Act, 2008
 • Punishment for contravention –

Penalty
Contravention of Sec 25(2) – LLP & Designated Partner ₹ 10,000
Contravention of Sec 25(1) – Partner ₹ 10,000

• Any person who ceases to be a partner of a LLP may himself file the
notice with the Registrar –

o If he has reasonable cause to believe that the LLP may not file
the notice with the Registrar and

o In case of any such notice filed by a partner, the Registrar shall

obtain a confirmation to this effect from the LLP unless the
LLP has also filed such notice.

However, where no confirmation is given by the LLP within 15

days, the registrar shall register the notice made by a person
ceasing to be a partner under this section.

5. Extent and Limitation of Liability of LLP and Partner

5.1 Partner as agent [Section 26]

Every partner of a LLP is, for the purpose of the business of the LLP, the agent
of the LLP, but not of other partners.

5.2 Extent of liability of LLP [Section 27]

LLP is not bound by LLP is liable if a partner is

anything done by a liable to any person -
partner in dealing with a • As a result of wrongful act
person if - or omission in the course
• Partner is acting without of business, or
authority • Acting with its authority.
• The person knows that he [Sub-section (2)]
has no authority or does
not know or believe him to
be a partner [Sub-section (1)]

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Partnership Act, 2008
 ✓ An obligation of the LLP whether arising in contract or otherwise, shall
be solely the obligation of the LLP [Sub-section (3)].

✓ The liabilities of the LLP shall be met out of the property of the LLP.
[Sub-section (4)]

5.3 Extent of liability of partner [Section 28]

• A partner is not personally liable, directly or indirectly for an obligation

referred to in section 27(3) solely by reason of being a partner of the LLP.

• A partner shall be personally liable for his own wrongful act or

omission, but a partner shall not be personally liable for the wrongful
act or omission of any other partner of the LLP.

5.4 Holding out [Section 29]

i) Any person,

• who by words spoken or written or by conduct,

• represents himself, or knowingly permits himself to be

represented to be a partner in a LLP

• is liable to any person

• who has on the faith of any such representation

• given credit to the LLP, whether the person representing himself

or represented to be a partner does or does not know that the
representation has reached the person so giving credit.

ii) However, where any credit is received by the LLP as a result of such
representation, LLP shall, without prejudice to the liability of person so
representing himself or represented to be a partner, be liable to extent
of credit received by it or any financial benefit derived thereon.

iii) Where after a partner’s death the business is continued in the same LLP
name, the continued use of that name or of the deceased partner’s
name as a part thereof shall not of itself make his legal representative
or his estate liable for any act of the LLP done after his death.

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5.5 Unlimited liability in case of fraud [Section 30]

• Where the LLP or any of its partners act with the intent to defraud creditors
of the LLP or any other person, or for any fraudulent purpose, the liability
of the LLP and partners who acted with intent to defraud creditors or
for any fraudulent purpose shall be unlimited for all or any of the debts
or other liabilities of the LLP.

• However, in case any such act is carried out by a partner, the LLP is
liable to the same extent as the partner unless it is established by the
LLP that such act was without the knowledge or the authority of the LLP.

• Punishment –

1. Every person who was knowingly a party to the carrying on of the

business in the fraudulent manner or with the intention to defraud
shall be punishable with

✓ Imprisonment for a term which may extend to 5 years and

✓ Fine which shall not be less than ₹ 50,000 but which may extend to
₹ 5 lakhs.

2. Apart from the criminal proceedings which may arise, the LLP and
any such partner or designated partner or employee shall be liable to
pay compensation to any person who has suffered any loss or
damage by reason of such conduct.

However, such LLP shall not be liable if any such partner or designated
partner or employee has acted fraudulently without knowledge of LLP.

5.6 Whistle blowing [Section 31]

1. Reduced Penalty –

The Court or Tribunal may reduce or waive any penalty leviable against
any partner or employee of a LLP, if it is satisfied that –

• Such partner or employee of a LLP has provided useful

information during investigation of such LLP; or

• When any information given by any partner or employee

(whether or not during investigation) leads to LLP or any partner
or employee of such LLP being convicted under this Act or any
other Act.
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Partnership Act, 2008
 2. Protection for partner/ employee –

No partner or employee of any LLP may be discharged, demoted, suspended,

threatened, harassed or in any other manner discriminated against the terms and
conditions of his LLP or employment merely because of his providing information
or causing information to be provided.

6. Financial Disclosures

6.1 Maintenance of books of account, other records and audit, etc.

[Section 34]

Proper Books of Account

LLP to maintain proper On cash According to To be kept at the
books as prescribed basis or double entry registered office
relating to its affairs for accrual system of for such period
each year of its existence. basis. accounting as prescribed.

Statement of Account and Solvency

To be prepared within To be signed by To be filed with the
As at the
6 months of the end of the designated Registrar every
last day of
the F.Y. in such form as partners of the year within
each F.Y.
prescribed. LLP. prescribed time

Audit of Accounts

To be audited in accordance CG may, by notification in the Official Gazette,

with the prescribed rules. exempt any class or classes of LLP

Failure to comply with Sec. 34

Designated Partner - Fine not less than
LLP - Fine not less than ₹25,000/-
₹10,000/- but which may extend to ₹ 1
but which may extend to ₹5 lakhs
lakh.

➔ Penalty for failure to file Statement of Solvency with the Registrar-

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Partnership Act, 2008
LLP and Designated Partners – ₹ 100 per day during which the default continues
subject to maximum of ₹ 1,00,000 for LLP and ₹ 50,000 for designated partners.

➔ Fine in case of non-compliance with provisions of Sec 34(1), 34(2) and 34(4) –

LLP – Minimum Rs. 25,000 and Maximum – Rs. 5,00,000

Designated Partner – Minimum Rs. 10,000 and Maximum – Rs. 1,00,000

6.2 Accounting and auditing standards [Section 34A]

The Central Government may, in consultation with the National Financial

Reporting Authority constituted under section 132 of the Companies Act, 2013,—

(a) prescribe the standards of accounting; and

(b) prescribe the standards of auditing,

as recommended by the Institute of Chartered Accountants of India constituted

under section 3 of the Chartered Accountants Act, 1949, for a class or classes of
limited liability partnerships.

6.3 Annual return [Section 35]

The LLP contra-distinct
• Every LLP shall file an annual return duly from Partnership Act,
authenticated with the Registrar within 1932 has prescribed the
60 days of closure of its financial year in filing of Annual Return in
such form and manner and accompanied accordance with
by such fee as may be prescribed. Companies Act, 2013.

• Punishment for failure to comply –

Minimum fine Maximum Fine

LLP ₹ 100/day ₹ 1 lakh
Designated Partner ₹ 100/day ₹50,000

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Partnership Act, 2008
 As per section 2(1)(l), “Financial Year” in relation to LLP means –

the period from the 1st day of April of a year to the 31st day of March of
the following year.

Provided that in the case of a limited liability partnership incorporated after

the 30th day of September of a year, the financial year may end on the 31st
day of March of the year next following that year.

Example: If a LLP has been incorporated on 15th October, 2020, then its financial
year may be from 15th October, 2020 to 31st March, 2022.

In keeping with the Income tax law, the financial year for LLP should be
from 1st April to 31st March each year.

7. Conversion into LLP

Unlisted Public
Firm to LLP Private Company to LLP
Company to LLP

Section 55 Section 56 Section 57

In accordance with In accordance with In accordance with

Chapter X and Second Chapter X and Third Chapter X and Fourth
Schedule Schedule Schedule

1. Certificate of Registration –

The Registrar, on satisfying that a firm, private company, or an unlisted

public company, as the case may be, has complied with the provisions of

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Partnership Act, 2008
 the various Schedules, provisions of this Act and the rules made
thereunder, register the documents and issue a certificate of
registration in such form as the Registrar may determine stating that the
LLP is, on and from the date specified in the certificate, registered under
this Act.

2. LLP to inform the Registrar –

The LLP shall, within 15 days of the date of registration, inform the
concerned Registrar of Firms or Registrar of Companies, as the case
may be, with which it was registered under the provisions of the Indian
Partnership Act, 1932 or the Companies Act, 2013 about the conversion
and of the particulars of the LLP in such form and manner as may be
prescribed.

3. Effects of conversion –

• Upon such conversion, the partners of the firm, the shareholders

of private company or unlisted public company, as the case may be,
the LLP to which such firm or such company has converted, and the
partners of the LLP shall be bound by the provisions of the
various Schedules, as the case may be, applicable to them.

• On and from the date of certificate of registration, the effects of the

conversion shall be such as specified in the various schedules, as
the case may be.

4. Effect of Registration –

i) There shall be a LLP by the name specified in the certificate of

registration registered under this Act.

ii) All tangible and intangible property vested in the firm or the
company, all assets, interests, rights, privileges, liabilities,
obligations relating to the firm or the company, as the case may be,
and the whole of the undertaking of the firm or the company, as
the case may be, shall be transferred to and shall vest in the LLP
without further assurance, act or deed.

iii) The firm or the company, as the case may be, shall be deemed to
be dissolved and removed from the records of the Registrar of
Firms or Registrar of Companies, as the case may be.

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Partnership Act, 2008
8. Foreign LLP [Section 59]
The Central Government may make rules for provisions in relation to –

• Establishment of place of business by foreign LLP within India and

• Carrying on their business therein by applying or incorporating, with such

modifications, as appear appropriate, the provisions of the Companies Act,
2013 or such regulatory mechanism with such composition as may be
prescribed.

9. Winding Up and Dissolution

• The winding up of a LLP may be either voluntary or by the Tribunal and

• LLP, so wound up may be dissolved [Section 63].

• Circumstances in which LLP may be wound up by Tribunal [Section 64]

LLP decides that LLP be wound up by the Tribunal

No. of partners is reduced below 2 for a period of more than 6

months

LLP is unable to pay its debts

LLP has acted against the sovereignty and integrity of India,

the security of the State or public order

LLP has defaulted in filing the Statement of Account and

Solvency or Annual Return for 5 consecutive F.Y.

Just and equitable grounds

• The Central Government may make rules for the provisions in relation to
winding up and dissolution of LLP [Section 65].

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Partnership Act, 2008
10. Miscellaneous

10.1 Business transactions of partner with LLP [Section 66]

A partner may lend money to and transact other business with the LLP and
has the same rights and obligations with respect to the loan or other
transactions as a person who is not a partner.

10.2 Application of the provisions of the Companies Act [Section 67]

• The Central Government may, by notification in the Official Gazette,

direct that any of the provisions of the Companies Act, 2013specified in
the notification –

▪ shall apply to any LLP, or

▪ shall apply to any LLP with such exception, modification and

adaptation, as may be specified, in the notification.

• A copy of every notification proposed to be issued under sub-section (1)

▪ Shall be laid in draft before each House of Parliament, while it

is in session, for a total period of 30 days which may be
comprised in one session or in two or more successive sessions,
and

▪ If both Houses agree in disapproving the issue of the

notification or both Houses agree in making any modification
in the notification, the notification shall not be issued or, as
the case may be, shall be issued only in such modified form
as may be agreed upon by both the Houses.

10.3 Establishment of Special Courts [Section 67A]

(1) Central Government may, for the purpose of providing speedy trial of
offences under this Act, by notification, establish or designate as many Special
Courts as may be necessary for such area (s), as may be specified in notification.

(2) Special Court shall consist of—

(a) single judge holding office as Sessions Judge or Additional Sessions Judge,
in case of offences punishable under this Act with imprisonment of 3 years or
more; and

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Partnership Act, 2008
 (b) Metropolitan Magistrate or a Judicial Magistrate of the first class, in
the case of other offences, who shall be appointed by Central Government
with concurrence of Chief Justice of the High Court:

➔ Provided that until Special Courts are designated or established under sub-
section (1), the Courts designated as Special Courts in terms of section 435
of Companies Act, 2013 shall be deemed to be Special Courts for the
purpose of trial of offences punishable under this Act

➔ Provided further that notwithstanding anything contained in the Code of

Criminal Procedure, 1973, any offence committed under this Act, which is
triable by a Special Court shall, until a Special Court is established under this
Act or the Companies Act, 2013, be tried by a Court of Sessions or the Court of
Metropolitan Magistrate or a Judicial Magistrate of the first class, as the case
may be, exercising jurisdiction over the area.]

10.4 Procedure and powers of Special Court [Section 67B]

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973,

all offences specified under section 67A(1) shall be triable only by the Special
Court established or designated for the area in which the registered office of the
LLP is situated in relation to which the offence is committed or where there are
more than one Special Courts for such area, by such one of them as may be
specified in this behalf by the High Court concerned.

(2) While trying an offence under this Act, a Special Court may also try an offence
other than an offence under this Act with which the accused may, under the
Code of Criminal Procedure, 1973 be charged at the same trial.

(3) Notwithstanding anything contained in the Code of Criminal Procedure, 1973,

the Special Court may, if it thinks fit, try in a summary way any offence under
this Act which is punishable with imprisonment for a term not exceeding 3 years:

➔ Provided that in the case of any conviction in a summary trial, no sentence of

imprisonment for a term exceeding 1 year shall be passed
➔ Provided further that, when at commencement of or in course of a summary
trial, it appears to the Special Court that nature of the case is such that the
sentence of imprisonment for a term exceeding 1 year may have to be passed
or that it is, for any other reason, undesirable to try the case summarily, the
Special Court shall, after hearing the parties, record an order to that effect and

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Partnership Act, 2008
 thereafter recall any witnesses who may have been examined and proceed to
hear or re- hear the case in accordance with the procedure for the regular trial.

10.5 Appeal and revision [Section 67C]

The High Court may exercise, so far as may be applicable, all powers conferred
by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on a High
Court, as if a Special Court within the local limits of the jurisdiction of the High
Court were a Court of Sessions trying cases within the local limits of the
jurisdiction of the High Court.

10.6 Electronic filing of documents [Section 68]

• Any document required to be filed, recorded or registered under this

Act may be filed, recorded or registered in such manner and subject to
such conditions as may be prescribed.

• A copy of or an extract from any document electronically filed with

or submitted to the Registrar which is supplied or issued by the
Registrar and certified through affixing digital signature to be a true
copy of or extract from such document shall, in any proceedings, be
admissible in evidence as of equal validity with the original
document.

• Any information supplied by the Registrar that is certified by the

Registrar through affixing digital signature to be a true extract
from any document filed with or submitted to the Registrar shall, in
any proceedings, be admissible in evidence and be presumed, unless
evidence to the contrary is adduced, to be a true extract from such
document.

10.7 Registration offices [Section 68A]

(1) For the purpose of

o exercising such powers and
o discharging such functions as are conferred on Central Government by
or under this Act or under rules made thereunder
o registration of LLPs under this Act,
Central Government shall, by notification, establish such number of registration
offices at such places as it thinks fit, specifying their jurisdiction.

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Partnership Act, 2008
(2) Central Government may appoint such Registrars, Additional Registrars, Joint
Registrars, Deputy Registrars and Assistant Registrars as it considers necessary,
for the registration of LLPs and discharge of various functions under this Act.

(3) Powers and duties of the Registrars and the terms and conditions of their
service shall be such as may be prescribed.

(4) Central Government may direct Registrar to prepare a seal or seals for the
authentication of documents required for, or connected with registration of LLP.

10.8 Payment of additional fee [Section 69]

If any document or return required to be filed or registered under this Act with
the Registrar is not filed or registered in time provided therein –

✓ It may be filed or registered after that time on payment of such additional

fee as may be prescribed in addition to any fee as is payable for filing of such
document or return,

✓ Such document or return shall be filed after due date of filing, without
prejudice to any other action or liability under this Act.

✓ A different fee or additional fee may be prescribed for different classes of LLP
or for different documents or returns required to be filed under this Act or
rules made thereunder.

11. Differences with other Forms of Organisation

11.1 Distinction between LLP and Partnership Firm

Basis LLP Partnership firm

Regulating The Limited Liability The Indian Partnership Act,
Act Partnership Act, 2008. 1932.
Body It is a body corporate. It is not a body corporate
corporate
Separate It is a legal entity separate It is a group of persons with
legal entity from its members. no separate legal entity.
Creation By a legal process called By an agreement between the
registration under the LLP Act, partners.
2008.
Registration Registration is mandatory. Registration is voluntary.

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Perpetual The death, insanity, Death, insanity, retirement or
succession retirement or insolvency of insolvency of the partner(s)
the partner(s) does not affect may affect its existence. It has
existence of LLP. no perpetual succession.
Name Name of the LLP to contain No guidelines. The partners
the word limited liability can have any name as per
partners (LLP) as suffix. their choice.
Liability Liability of each partner Liability of each partner is
limited to the extent to unlimited. It can be extended
agreed contribution except in up to the personal assets of
case of willful fraud. the partners.
Mutual Each partner can bind the LLP Each partner can bind the
agency by his own acts but not the firm as well as other partners
other partners. by his own acts.
Designated At least 2 designated partners There is no provision for such
partners and at least one of them shall partners under the
be resident in India. Partnership Act, 1932.
Common It may have its common seal There is no such concept in
seal as its official signatures. partnership
Legal Only designated partners are All partners are responsible
compliances responsible for all the for all the compliances and
compliances and penalties penalties under the Act.
under this Act.
Annual filing LLP is required to file: Partnership firm is not
of i) Annual statement of required to file any annual
documents accounts document with the registrar
ii) Statement of solvency of firms.
iii) Annual return every year.
Foreign Foreign nationals can become Foreign nationals cannot
partnership a partner in a LLP. become a partner in a
partnership firm.
Minor as Minor cannot be admitted to Minor can be admitted to the
partner the benefits of LLP. benefits of the partnership
with the prior consent of the
existing partners.

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11.2 Distinction between LLP and Limited Liability Company

Basis LLP Limited Liability Company

Regulating The Limited Liability The Companies Act, 2013.
Act Partnership Act, 2008.
Members/ The persons who contribute The persons who invest the
Partners to LLP are known as partners money in the shares are
of the LLP. known as members of the
company.
Internal Governed by contract Regulated by statute (i.e.,
governance agreement between the Companies Act, 2013).
structure partners.
Name To contain word “Limited To contain word “limited” and
Liability partnership” or “LLP” Pvt. Co. to contain the word
as suffix. “Private limited” as suffix.
No. of Minimum – 2 members • Private company:
members/ Maximum – No such limit on Minimum – 2 members
partners the members in the Act. Maximum 200 members
• Public company:
Minimum – 7 members
Maximum – No such limit
on the members.
• OPC – One member
Members Members of the LLP can be Members can be
individuals/or body corporate organizations, trusts, another
through the nominees. business form or individuals.
Liability of Limited to the extent of Limited to the amount unpaid
members/ agreed contribution in except on the shares held by them.
partners in case intention is fraud.
Management Managed by the partners Managed by the partners
including the designated including the designated
partners authorized in the partners authorized in the
agreement. agreement.
Minimum Minimum 2 designated Pvt. Co. – 2 directors
number of partners. Public co. – 3 directors
directors/
designated
partners
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12. Overview

Minimum 2 partners

Characteristics
Minimum 2 designated partners and
one should be resident in India

Name Reservation

Incorporation Incorporate LLP

LLP Agreement

Mutual rights and liabilities to be

governed by LLP Agreement/ First
Schedule
Partners and their
relations Cessation of partnership
Limited Liability

Changes in Partners to be registered

Partnership

Partner is not an agent of other

Liability of LLP and partner
Partners
Unlimited liability in case of fraud

Maintenance of Books of Accounts

Financial Disclosure Statement of Account and Solvency

Annual Return

Firm to LLP
Conversion into LLP
Company to LLP

Voluntary
Winding Up and
dissolution
By tribunal

Differences with other forms of oragnisation

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