Limited Liability Partnerships Quiz

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Questions and Answers

Which of the following is excluded from the definition of Body Corporate?

Corporation Sole (correct)

LLP registered under the Act

Co-operative Society (correct)

Company incorporated outside India

What does the term 'Financial Year' mean in the context of LLPs?

1st January to 31st December

1st April to 31st March of the following year (correct)

Entire calendar year

15th October to 31st March

Which of the following statements about Partners in an LLP is correct?

An undischarged insolvent can be a partner

A body corporate cannot be a partner

A person declared of unsound mind can be a partner

An individual of sound mind can become a partner (correct)

What qualifies an LLP as a Small LLP?

Both contribution and turnover within certain limits Signup and view all the answers

Which of the following can become partners in an LLP?

Another LLP Signup and view all the answers

What is a Foreign LLP?

An LLP formed in a foreign country with an Indian presence Signup and view all the answers

Which of the following is true regarding the Indian Partnership Act, 1932?

It does not apply to LLPs except as provided otherwise Signup and view all the answers

Under which condition can an individual not become a partner in an LLP?

He has applied for adjudication as insolvent Signup and view all the answers

What happens to a partner's obligations upon ceasing to be a partner in an LLP?

The partner remains obligated for the duration of their involvement. Signup and view all the answers

What must a partner do within 15 days of changing their name or address?

Notify the LLP of the change. Signup and view all the answers

If a partner of an LLP has ceased to be a partner, what are they entitled to receive?

Actual partner contributions and accumulated profits after losses. Signup and view all the answers

What is the penalty for failing to file changes related to partners with the Registrar of Companies (RoC)?

Rs. 10,000 for LLP and designated partners. Signup and view all the answers

Under which condition is an LLP NOT bound by the actions of a partner?

If the partner has no authority for the act in question. Signup and view all the answers

What happens if a former partner believes that the LLP will not file a notice of their cessation?

They may file the notice with the RoC themselves. Signup and view all the answers

To whom does the obligation of the LLP belong?

Solely to the LLP itself. Signup and view all the answers

What is true about the relationship between partners in an LLP?

Partners are agents of the LLP but not of each other. Signup and view all the answers

Which of the following is a characteristic of a Limited Liability Partnership (LLP)?

LLP has a perpetual succession. Signup and view all the answers

What does the term 'mutual agency' imply in the context of an LLP?

Partners are agents of the LLP and not of each other. Signup and view all the answers

Which of the following best describes the liability of partners in an LLP?

Liability of partners is limited to their capital contribution. Signup and view all the answers

What is the primary purpose of the LLP Act, 2008?

To offer a flexible and limited liability structure for partnerships. Signup and view all the answers

Which schedule of the LLP Act addresses the rights of partners in the absence of a formal agreement?

First Schedule Signup and view all the answers

What does the term 'limited liability' signify in the context of an LLP?

Partners can only lose their agreed contribution in case of debts. Signup and view all the answers

Which of the following is not a feature of an LLP?

Ability to issue shares publicly Signup and view all the answers

Which action is addressed in the Second Schedule of the LLP Act, 2008?

Conversion of a private company into LLP Signup and view all the answers

What must be included in the incorporation document of an LLP?

A statement of compliance with the Act and rules Signup and view all the answers

Who can make the statement of compliance in the incorporation document?

An advocate, CA, CS, or Cost Accountant engaged in formation, along with any subscriber Signup and view all the answers

What is the penalty for making a false statement in the incorporation document?

Imprisonment up to 2 years and a fine ranging from Rs. 10,000 to Rs. 5 lakhs Signup and view all the answers

What is required for the registration of an LLP's incorporation document?

Submission of incorporation documents to the Registrar of Companies Signup and view all the answers

What is a consequence of failing to file a notice for a change in the registered office?

A fine of Rs. 500 per day, up to Rs. 50,000 Signup and view all the answers

How long does the Registrar have to register the incorporation document after receipt?

14 days Signup and view all the answers

What is the nature of an LLP as per the incorporation rules?

It incorporates with a profit motive Signup and view all the answers

What document serves as conclusive evidence of the incorporation of an LLP?

Certificate of incorporation Signup and view all the answers

What types of contributions can a partner make under the Limited Liability Partnership Act, 2008?

Contributions can include tangible and intangible property. Signup and view all the answers

According to the LLP Act, who can enforce a partner's obligation to contribute?

A creditor who extends credit based on the LLP agreement. Signup and view all the answers

What is required regarding the maintenance of books of account under Section 34?

Proper books of account must be maintained on a cash or accrual basis as per double entry system. Signup and view all the answers

What is the maximum penalty for non-compliance in filing with the Registrar of Companies (RoC)?

Rs. 100/day up to Rs. 1 lakh. Signup and view all the answers

When must an LLP file its annual return according to Section 35?

Within 60 days of the fiscal year end. Signup and view all the answers

Who is responsible for prescribing accounting and auditing standards under Section 34(A)?

The Central Government in consultation with NFRA. Signup and view all the answers

What is the penalty for non-compliance with the maintenance of books of account?

Rs. 25,000 to Rs. 5 Lakhs. Signup and view all the answers

What does Section 36 of the LLP Act pertain to?

Inspection of documents by the registrar. Signup and view all the answers

What is the maximum imprisonment term for making a false statement in any return or document?

2 years Signup and view all the answers

What is the monetary penalty for making a false statement in a return?

Rs. 1 lakh to Rs. 5 lakhs Signup and view all the answers

What is the fine range for failing to provide information when required by the RoC?

Rs. 2,000 to Rs. 25,000 Signup and view all the answers

What must occur for a compounding of offences to take place?

An application must be made to RoC. Signup and view all the answers

What does the RD have the power to do concerning offences punishable by fine only?

Compound such offences for a specified sum. Signup and view all the answers

How long must an offender wait before compounding a subsequent offence to avoid it being considered as a first offence?

3 years Signup and view all the answers

What happens if an offence is compounded after the institution of prosecution?

RoC must inform the court and discharge the offender. Signup and view all the answers

What is the maximum fine for failing to comply with an order directed by the RD during compounding?

Twice the maximum fine of the original offence Signup and view all the answers

Study Notes

Introduction

The Limited Liability Partnership Act, 2008, received presidential assent on January 7, 2009, and was enacted on January 9, 2009.
It consists of 81 sections and 4 schedules.

Schedules

First Schedule: Rights of partners and LLP in the absence of formal agreement.
Second Schedule: Converting a firm into LLP.
Third Schedule: Converting a private company into LLP.
Fourth Schedule: Converting an unlisted company into LLP.

Need and Benefits

The act was introduced as an alternative corporate structure to meet evolving economic demands.
It bridges the gap between traditional unlimited liability partnerships and structured limited liability companies.
It provides limited liability benefits while allowing flexible, partnership-like internal structures based on mutual agreements.
Partner liability is limited to their capital contribution.

Characteristics of an LLP

Body Corporate: A company, including LLPs registered under the Act, LLPs incorporated outside India, and companies incorporated outside India. It excludes corporation sole, cooperative societies, and other body corporate notified by the government.
Perpetual Succession: Continues indefinitely.
Succession: The LLP continues even if partners leave, enter, or pass away.
Separate Legal Entity: Distinct from its partners.
Mutual Agency: Partners are agents of the LLP only, not of each other.
LLP Agreement: Contains mutual rights and responsibilities of partners and the LLP.
Compromise or Arrangement: A restructuring option for the LLP.
Conversion: Transforming an existing entity into an LLP.
Common Seal: Not mandatory.
Limited Liability: Partners' liability is limited to their capital contributions.
Business for Profit Only: Not for non-profit objectives.
Foreign LLPs: LLPs formed outside India.
E-filing of Documents: Facilitates efficient document submission.

Definitions

Address (Section 2(1)(a)):
- For individuals, the usual residential address.
- For corporations, the registered office address.

Other sections

Section 6: Minimum number of partners (minimum 2, maximum no limit).
Section 7: Designated Partner (DP) requirements (at least 2 individuals/bodies corporate as DPs, and at least 1 resident of India).
Section 8: Liabilities of a DP.
Section 9: Changes in DP (if any vacancy must be filled within 30 days with appointed DP).
Section 11: Incorporation document requirements.
Section 12: Incorporation by registration (Registrar of Companies).
Section 13: Registered office of LLP and changes.
Section 14: Effect of registration.
Section 15: Name requirements (suffix ‘LLP’ or Limited Liability Partnership).
Section 16: Reservation of name.
Section 17: Rectification of LLP name.
Section 22: Eligibility for partners.
Section 23: Relationship of partners (mutual rights and duties).
Section 24: Cessation of partnership interest.
Section 25: Registration of any changes (name or address) to partners or LLP.
Section 26: Partners as agents (partners act as agents of the LLP but not for one another).
Section 27: Extent of liability of LLP (not responsible for partner's actions outside their power).
Section 28: Extent of partner liability.
Section 29: Holding out.
Section 30: Unlimited liability in case of fraud (partners and LLP face unlimited liability).
Section 31: Whistle blowing.
Section 32: Form of contribution of partners.
Section 33: Obligations of partners to contribute as per LLP agreement.
Section 34: Maintenance of books of accounts.
Section 34A: Auditing standards for LLP accounts.
Section 35: Annual Return.
Section 36: Inspection of the document by Registrar (access to documents).
Section 37: Penalty for false statements in documents.
Section 38: Power of Registrar(asking information from LLP officials).
Section 39: Compounding of offences.
Section 42: Transferable partnership interest.
Section 58: Registration and effect of conversion (from firm, private company, or unlisted company).
Section 59: Foreign LLPs (rules CG prescribed)
Section 60: Compromise or arrangement (C/A) of LLP.
Section 61: Power of Tribunal to enforce C/A.
Section 62: Provisions for facilitating reconstruction.
Section 63: Winding up and dissolution of LLP.
Section 64: Circumstances for Tribunal initiated winding up.
Section 66: Business transactions of a partner with the LLP.
Section 67: Application of Companies Act provisions to LLP.
Section 69: Payment of Additional Fee.
Section 70: Enhanced Punishment.
Comparison of LLP with Other Firms (e.g., Partnership Firms, Limited Companies)

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Description

Test your knowledge on the essential aspects of Limited Liability Partnerships (LLPs) with this quiz. Explore definitions, partner obligations, and specific conditions related to LLPs. Learn more about the Indian Partnership Act, and various regulations governing LLPs.