CA Intermediate · Corporate and Other Laws

The Limited Liability Partnership Act, 2008: formula sheet

Full chapter guide

Key formulas

Definition of LLP: LLP = partnership formed and registered under the LLP Act, 2008 (section 2(1)(n)); Quote this in definition questions.
Separate legal entity: LLP = body corporate + separate from its partners (section 3(1)); The key feature. Most comparisons start here.
Perpetual succession: Change in partners does not affect existence, rights or liabilities of LLP (section 3(2) and 3(3)); Use for questions on death, retirement or insolvency of a partner.
Name rule: Last words of name must be 'limited liability partnership' or 'LLP' (section 15(1)); Name cannot be undesirable, or identical or too nearly resembling another LLP, a company or a registered trade mark (section 15(2)).
Penalty for misuse of LLP in name: Fine of ₹50,000 to ₹5,00,000 (section 20); Applies to persons doing business under such a name without being incorporated as an LLP.
Conversion routes: Firm (s.55, Second Schedule); private company (s.56, Third Schedule); unlisted public company (s.57, Fourth Schedule); Listed companies cannot convert under these sections.
Who can incorporate (Section 11(1)(a)): Two or more persons + lawful business + view to profit + subscribe names to incorporation document; Minimum two persons. The business must be lawful and carried on with a view to profit.
Filing (Section 11(1)(b)): Incorporation document → Registrar of the State of the proposed registered office, in prescribed manner and with prescribed fees; The State is decided by the location of the registered office.
Compliance statement (Section 11(1)(c)): Statement by advocate / CS / CA / Cost Accountant engaged in formation + any one subscriber; It is filed along with the incorporation document. It confirms compliance with the Act and rules for incorporation and matters precedent and incidental to it.
Contents of incorporation document (Section 11(2)): Name + proposed business + registered office address + name and address of each partner on incorporation + name and address of designated partners + other prescribed information; It must also be in the prescribed form.
False statement penalty (Section 11(3)): Imprisonment up to 2 years and fine of ₹10,000 to ₹5,00,000; Applies to a person who makes the Section 11(1)(c) statement which he knows to be false or does not believe to be true. The fine is not less than ten thousand rupees and may extend to five lakh rupees.
Registered office default (Section 13(4)): ₹500 per day of default, maximum ₹50,000, on the LLP and on every partner; The maximum of ₹50,000 applies separately to the LLP and to each partner. This is the position after the 2021 amendment, effective 1-4-2022.
Name reservation (Section 16): Reservation period = 3 months from the date of intimation by the Registrar; Covers the name of a proposed LLP or a name to which an LLP proposes to change. The Registrar may reserve it if satisfied that the name is not rejectable on a ground in Section 15(2).
Conversion from firm (Sections 55 and 58): Firm complies with Second Schedule → Registrar registers documents and issues certificate → LLP exists from date in certificate; The LLP must inform the Registrar of Firms or Registrar of Companies within 15 days of the date of registration.
Status of LLP: LLP = body corporate + separate legal entity + perpetual succession; Section 3. A change in partners does not affect the LLP's existence, rights or liabilities.
Agency of partner: Partner = agent of the LLP, not of other partners; Section 26. Applies for the purpose of the LLP's business.
Governing rules between partners: LLP agreement first; if silent, First Schedule; Section 23(1) and 23(4). Agreement and changes must be filed with the Registrar.
Number of designated partners: At least 2 designated partners who are individuals; at least 1 resident in India; Section 7(1). Resident = stayed in India not less than 120 days during the financial year.
Where all partners are bodies corporate (or a mix): At least 2 individuals (partners or nominees) act as designated partners; Proviso to Section 7(1).
Designated partner formalities: Prior consent + file particulars within 30 days of appointment + DPIN; Section 7(3), (4) and (6). DPIN is obtained from the Central Government.
Filling a vacancy: LLP may appoint within 30 days of vacancy; else each partner is deemed designated partner; Section 9. The deemed rule also applies if only one designated partner remains.
Change in partners: LLP files notice with Registrar within 30 days of a person becoming or ceasing to be a partner; Section 25(2)(a). Penalty is ₹10,000 on the LLP and every designated partner (Section 25(4)).
Change in partner's name or address: Partner informs LLP within 15 days; LLP files notice within 30 days; Section 25(1) and 25(2)(b). A partner's default carries a ₹10,000 penalty (Section 25(5)).
Liability of partner: No personal liability solely for being a partner; liable for own wrongful act; not liable for another partner's wrongful act; Section 28.
Governing rule (section 23(1)): Mutual rights and duties = as per LLP agreement (save as otherwise provided by the Act); Covers partner-to-partner and LLP-to-partner rights and duties.
Filing (section 23(2)): LLP agreement + every change → file with Registrar (prescribed form, manner, fees); Changes must be filed too, not just the original agreement.
Pre-incorporation agreement (section 23(3)): Written agreement before incorporation binds the LLP only if ratified by all partners after incorporation; Ratification must be by all partners, not a majority.
No agreement (section 23(4)): No agreement on a matter → First Schedule provisions apply; Applies matter by matter, so it also covers silence on a point.
Form of contribution (section 32(1)): Contribution = tangible, movable, immovable or intangible property or other benefit, including money, promissory notes, agreements to contribute and contracts for services; Services, even future services, can be a contribution.
Accounting of contribution (section 32(2)): Monetary value of each partner's contribution → accounted for and disclosed in the LLP's accounts as prescribed; Value must be shown in money terms.
Obligation to contribute (section 33): Obligation = as per LLP agreement; creditor who relied on it, without notice of compromise, may enforce the original obligation; A private compromise among partners does not defeat such a creditor.
Books of account: Proper books | cash or accrual basis | double entry | kept at registered office | s 34(1); Period of retention and form of books are prescribed by rules.
Statement of Account and Solvency: preparation: Prepare within 6 months from end of financial year, as at last day of that year; signed by designated partners | s 34(2); Filed with Registrar within prescribed time under s 34(3). Commonly filed in Form 8.
Annual return: File within 60 days of closure of financial year | s 35(1); Commonly filed in Form 11. Authenticated, with prescribed fee.
Audit: Accounts audited as per rules | s 34(4); Central Government may exempt classes of LLPs; Audit thresholds are in the rules, not the Act.
Penalty for late filing under s 34(3) and s 35: ₹100 per day of default; maximum ₹1,00,000 for the LLP and ₹50,000 for each designated partner; Applies to s 34(5) (late filing of Statement of Account and Solvency) and s 35(2) (late annual return).
Fine for default under s 34(1), (2) and (4): LLP: ₹25,000 to ₹5,00,000. Every designated partner: ₹10,000 to ₹1,00,000 | s 34(6); Applies to failure to keep books, prepare the statement, or get accounts audited.
Winding up for non-filing: Default in filing Statement of Account and Solvency or annual return for any 5 consecutive financial years | s 64(e); Tribunal may wind up the LLP.
Tax status of LLP: LLP is taxed as a partnership firm; the partner's share of profit is not taxed again in the partner's hands; State this in plain words. Do not quote rates or old section numbers unless asked. Partner remuneration and interest are deductible only within the limits of the income-tax law.
Section 43(1): mandatory appointment: Tribunal declaration (suo motu or on application by not less than 1/5 of total partners) or Court declaration → Central Government SHALL appoint inspectors; The word is 'shall'. The Government has no discretion here.
Section 43(2) and (3): discretionary appointment: Central Government MAY appoint inspectors on: (a) application by not less than 1/5 of partners with evidence and security; (b) application by the LLP; (c) its own opinion of fraud, oppression, breach of the Act, or Registrar/agency report; Remember the three grounds in (c): (i) fraud, unlawful purpose or oppression, (ii) non-compliance with the Act, (iii) report of the Registrar or another agency.
Section 46: related entities: Inspector may investigate associated entity, partner or designated partner → prior approval of Central Government, after a show-cause opportunity; The inspector reports only so far as it is relevant to the LLP's investigation.
Section 60: voting majority: Majority representing 3/4 in value of creditors or partners at the meeting + Tribunal sanction → binding; The test is value, not number of persons.
Section 60(3) and (4): filing and penalty: File order with Registrar within 30 days; effective only after filing. Default: ₹10,000 + ₹100 per day after the first day; maximum ₹1,00,000 (LLP) and ₹50,000 (each designated partner); The penalty falls on the LLP and every designated partner. The same penalty structure applies to section 62(4).
Section 61: enforcement: Tribunal supervises the deal and may modify it; if unworkable, it may order winding up (deemed an order under section 64); Winding up can be on the Tribunal's own motion or on application by any interested person.
Section 62: reconstruction or amalgamation: Tribunal may order transfer of property and liabilities, continuation of proceedings, dissolution without winding up, provision for dissenters, incidental matters; certified copy filed with Registrar within 30 days; An LLP shall not be amalgamated with a company. Dissolution of a transferor needs a prior Official Liquidator report. Amalgamation of an LLP being wound up needs a Registrar's report. Both reports must say that affairs were not conducted in a manner prejudicial to partners or public interest.
Conversion of a firm: Firm → LLP: Section 55 + Second Schedule; The firm converts in accordance with that Chapter and the Second Schedule.
Conversion of a private company: Private company → LLP: Section 56 + Third Schedule; Only a private company. The Third Schedule governs the conversion.
Conversion of an unlisted public company: Unlisted public company → LLP: Section 57 + Fourth Schedule; A listed public company is not covered by this provision.
Registration and certificate: Registrar satisfied of Schedule compliance → registers documents → certificate of registration (Section 58(1)); The LLP is registered from the date specified in the certificate.
Intimation after conversion: Inform Registrar of Firms / Registrar of Companies within 15 days of registration; This is the proviso to Section 58(1). Form and manner are prescribed.
Effects of conversion: Section 58(4): (a) LLP exists; (b) property, liabilities and undertaking vest in the LLP without further assurance, act or deed; (c) firm or company deemed dissolved and removed from records; Applies from the date of registration in the certificate, notwithstanding any other law.
Foreign LLPs: Section 59: Central Government rules for place of business and carrying on business in India; Rules may apply or incorporate Companies Act, 2013 provisions with modifications, or a prescribed regulatory mechanism.
Winding up and dissolution: Section 63: winding up is voluntary or by the Tribunal; an LLP so wound up may be dissolved; Section 65 empowers the Central Government to make rules on winding up and dissolution.

Quick revision

An LLP is a body corporate with a separate legal identity from its partners.
On incorporation, those who subscribed their names to the incorporation document are its partners.
Any other person becomes a partner by and in accordance with the LLP agreement.
Mutual rights and duties are governed by the LLP agreement, save as the Act provides otherwise.
The LLP agreement and any changes are filed with the Registrar in the prescribed form, manner and fee.
If the agreement is silent on a matter, the First Schedule provisions apply.
A pre-incorporation written agreement can bind the LLP only if all partners ratify it after incorporation.
Every LLP needs at least two designated partners who are individuals, and at least one must be resident in India.
Resident in India means staying in India not less than 120 days during the financial year.
If all partners are bodies corporate, at least two individuals who are partners or nominees must act as designated partners.
An individual must give prior consent before becoming a designated partner, and particulars are filed with the Registrar within thirty days of appointment.
Every designated partner must obtain a DPIN from the Central Government.

Common mistakes

Saying an LLP is a company. Fix: Say an LLP is a body corporate under the LLP Act, not a company under the Companies Act, 2013. Use 'body corporate' as the term.
Saying a partner is never liable for anything. Fix: Say partners are not personally liable for the LLP's debts merely by being partners. A partner remains liable for his own wrongful acts or fraud.
Saying an LLP can be formed by one person. Fix: Remember that Section 11(1)(a) requires two or more persons associated for a lawful business with a view to profit.
Filing the incorporation document with the Registrar of any State. Fix: State that it is filed with the Registrar of the State in which the registered office is to be situated.
Saying a partner is agent of other partners, as in a general partnership. Fix: Remember Section 26: agent of the LLP only, not of other partners.
Saying a partner is liable for another partner's wrongful act. Fix: Section 28(2): the partner is liable for his own wrongful act or omission, not for another partner's.
Saying the Indian Partnership Act, 1932 fills gaps when there is no LLP agreement. Fix: Under section 23(4) the gap is filled by the First Schedule to the LLP Act.
Saying only the original agreement must be filed. Fix: The agreement and any changes made in it must be filed with the Registrar.
Saying the Statement of Account and Solvency must be filed within six months. Fix: Say: prepare within six months; file within the prescribed time under s 34(3).
Stating the annual return is due in sixty days from the AGM or the statement date. Fix: Count sixty days from the closure of the financial year.

Exam tips

Learn the 'LLP vs firm' and 'LLP vs company' comparisons as bullet lists of 5 to 6 bases each. They are frequent written questions.
In MCQs, test the keywords: 'separate legal entity', 'perpetual succession', 'body corporate'. Options that deny these are wrong.
Quote section 3 for status and succession, section 15 for name, and sections 55 to 57 for conversion. Do not quote a section you are unsure of.
In scenario questions, write provision, facts, conclusion in that order.
Learn Section 11 as a list: persons, filing, statement, contents, penalty. Examiners often ask for exactly these.
In MCQs, watch for the numbers: 2 persons, 3 months, 15 days, 2 years, ₹10,000, ₹5,00,000, ₹500 per day, ₹50,000.
For case studies, check whether the facts show a lawful business, a profit motive and at least two persons before concluding.
For conversion questions, state the effect in order: LLP registered from the certificate date, property and liabilities vest in the LLP, and the firm or company is deemed dissolved.