Limited Liability Partnership (LLP) Concept

Questions and Answers

What allows a limited liability partnership to continue its existence despite the retirement or death of a partner?

Common seal

Perpetual succession (correct)

Agreement among partners

Separate legal entity

Which of the following accurately describes the legal status of a Limited Liability Partnership?

It is an artificial legal person (correct)

It is a natural person

It is a fictitious entity

It is a general partnership

What aspect of an LLP's structure provides personal liability protection to its partners?

Minimum number of partners

Perpetual existence

Limited liability (correct)

Common seal requirement

In a Limited Liability Partnership, who can affix the common seal?

At least two designated partners Signup and view all the answers

According to the rules governing LLPs, what is the minimum number of partners required?

Two partners Signup and view all the answers

What governs the rights and duties of partners in the absence of an LLP agreement?

The Act governing LLPs Signup and view all the answers

Which obligation must be fulfilled regarding designated partners in an LLP?

At least one must be a resident in India Signup and view all the answers

What characteristic of an LLP differentiates it from its individual partners in terms of liability?

Limited liability based on contributions Signup and view all the answers

What is one characteristic of a Limited Liability Partnership (LLP)?

It combines the limited liability of a company with the management flexibility of a partnership. Signup and view all the answers

In an LLP, what determines the liability of the individual partners?

The amount contributed by each partner as specified in the LLP Agreement. Signup and view all the answers

How do creditors recover debts from an LLP?

They can only recover amounts up to the capital of the LLP. Signup and view all the answers

Which of the following statements about the LLP as a legal entity is correct?

An LLP is considered a separate legal entity from its partners. Signup and view all the answers

What is the maximum liability of partners in an LLP when capital is insufficient to cover debts?

Their individual contributions as specified in the LLP Agreement. Signup and view all the answers

According to the LLP Act, how is an LLP formed?

Under a specific legal framework set by the LLP Act. Signup and view all the answers

What can partners contribute to an LLP as their share?

Any form including tangible, intangible, movable, or immovable property. Signup and view all the answers

What is the consequence if partners X and Y in ABZ LLP fail to meet their agreed capital contributions?

Their liability remains capped at the actual contribution made. Signup and view all the answers

Study Notes

Definition of Limited Liability Partnership (LLP)

A corporate business vehicle that provides the benefits of limited liability to its members and allows them to manage their internal management based on a mutually agreed-upon agreement.

Key Features of LLP

Combines elements of a corporate structure and a partnership firm structure, making it a hybrid between a company and a partnership.
Partners have lower liabilities for any debts that may arise in the future while running the business.
Partners contribute towards the LLP as specified in the LLP Agreement, and their share can be in any form (tangible or intangible, movable or immovable property, monies, and cash).

Liability in an LLP

The Company is liable for losses or debts incurred in running the business, and individual members of the LLP are not liable for such losses or debts.
Partners are only liable for the amount they have contributed to the LLP (up to the capital amount).

Salient Features of Limited Liability Partnership

An LLP is a body corporate, formed and incorporated under the Limited Liability Partnership Act 2008 (LLP Act).
It is a legal entity separate from its partners, with perpetual succession, and can enter into contracts and hold property in its name.
It is a separate legal entity, with the liability of partners limited to their contribution to the LLP.
The creditors of the LLP are not the creditors of individual partners.
An LLP Agreement governs the rights and duties of all partners, and can be devised as per their choice.
It is an artificial legal person, created through a legal process, with all the rights of an individual.
It can have a common seal, which is not mandatory, but must be kept under the custody of a responsible official and affixed in the presence of at least two designated partners.

Partners in an LLP

Every LLP must have at least two partners, and at least two individuals as designated partners.
At any time, at least one designated partner should be a resident in India.
There is no maximum limit on the number of partners in an LLP.
Every partner is an agent of the LLP for the purpose of the business, but not an agent of other partners.
The liability of each partner has limitations to their agreed contribution to the LLP.
It provides personal liability protection to its partners.

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Description

Learn about the concept of Limited Liability Partnership (LLP), a business structure that combines the benefits of a company and a partnership firm. Understand the advantages of LLP, including limited liability for partners and flexibility in internal management.