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Accounting · Partnership and LLP Accounts

Limited Liability Partnership (LLP) Accounts for CA Foundation

Updated 1 October 2026

A Limited Liability Partnership (LLP) is a body corporate formed under the LLP Act 2008. It is a separate legal entity, and partners have limited liability. To answer questions, state the feature, compare it with a partnership firm, then give the accounts, statement of account and solvency, audit and filing rules.

Understand Limited Liability Partnership (LLP) Accounts

A Limited Liability Partnership (LLP) mixes features of a company and a partnership. It is created by registration under the Limited Liability Partnership Act, 2008. It is a body corporate and a separate legal entity from its partners.

Because it is a separate entity, it can own property, sue and be sued in its own name, and it has perpetual succession. Death, retirement or insolvency of a partner does not end the LLP. A company-style structure but with a partnership-style internal arrangement.

The key benefit is limited liability. A partner's liability is generally limited to the agreed contribution to the LLP. A partner is not personally liable for the LLP's debts just because of being a partner, nor for another partner's wrongful act. A partner remains liable for their own wrongful acts, and fraud can lead to unlimited liability.

An LLP has at least two partners. Every LLP must have at least two designated partners who are individuals. If all partners are bodies corporate, at least two of their nominees (who are individuals) must be designated partners. At least one designated partner must be resident in India. The rights and duties of partners are governed by the LLP agreement. The First Schedule of the Act applies only if there is no LLP agreement. Under that Schedule, profit sharing is equal by default.

On accounts, an LLP must keep proper books on cash or accrual basis, on double entry. It prepares a Statement of Account and Solvency and an Annual Return, and files them with the Registrar. Audit is required only if turnover or contribution exceeds the prescribed limits. Check the current limits in your study material.

Key rules to remember

Legal status
LLP = body corporate + separate legal entity + perpetual succession
Contrast with a partnership firm, which has no separate legal entity under the Partnership Act.
Minimum members
Minimum partners = 2; designated partners = at least 2 individuals (if all partners are bodies corporate, at least 2 of their nominees who are individuals), at least 1 resident in India
A partnership firm has no concept of designated partners.
Liability of partner
Liability = limited to agreed contribution (own wrongful acts and fraud excepted)
In a firm, liability of partners is unlimited and joint and several.
Books of account
Proper books, double entry, cash or accrual basis, for the financial year as per the LLP rules (commonly ending 31 March)
Kept at the registered office.
Annual filings
Statement of Account and Solvency + Annual Return
Filed with the Registrar each year within prescribed time limits. Check due dates in your material.
Audit rule
Audit required if contribution or turnover exceeds the prescribed limits
Learn the current limits from your study material. Do not assume they are fixed.
Profit sharing default
No agreement: profits shared equally; no interest on capital
The First Schedule applies only if there is no LLP agreement, so an agreement can override it.

How to solve Limited Liability Partnership (LLP) Accounts questions

Use this method for any theory or short-answer question on LLP. Write in provision, facts, conclusion order so you earn step marks.

  1. 1Read the question and mark the key word: feature, difference, accounting, audit or filing.
  2. 2State the legal position first: LLP is a body corporate under the LLP Act 2008 with separate legal entity.
  3. 3If asked for differences, write points in pairs: LLP on one side, partnership firm on the other, on the same basis.
  4. 4Add the liability point: limited to contribution for LLP, unlimited for firm partners.
  5. 5For accounts, state the requirements: proper books, double entry, Statement of Account and Solvency, Annual Return.
  6. 6Mention audit conditions with the thresholds only if you are sure of them. Otherwise say 'if limits prescribed are exceeded'.
  7. 7Close with a one-line conclusion tying the answer to the question asked.

Quickest way: Compare in pairs, then list filings

When to use it: Use when a question asks for differences or features and you have limited time.

  1. Draw two columns in your head: LLP and Partnership Firm.
  2. Write 5 points in the order: status, liability, succession, partners count, governing law.
  3. Add one line on accounts: books, Statement of Account and Solvency, Annual Return.
  4. Add one line on audit: needed only above the prescribed limits.
  5. Check that each point has a pair so the comparison is clear.

Common mistakes in Limited Liability Partnership (LLP) Accounts

  • Saying LLP partners have unlimited liability like a firm.

    The word 'partnership' makes students think the rules are the same.

    Fix: Remember that LLP partners' liability is limited to their contribution, except for their own wrongful acts or fraud.

  • Writing that an LLP is governed by the Partnership Act 1932 or the Companies Act.

    It looks like a mix of both.

    Fix: Write that an LLP is governed by the LLP Act 2008 and the LLP agreement.

  • Saying LLP ends when a partner dies or retires.

    Students carry over the firm rule.

    Fix: State that LLP has perpetual succession, so changes in partners do not affect its existence.

  • Claiming audit is compulsory for every LLP.

    Students mix it up with company audit.

    Fix: Say audit is required only if turnover or contribution crosses the prescribed limits.

  • Mixing up the filings: calling the Statement of Account and Solvency the Balance Sheet only.

    Both relate to the financial position.

    Fix: Name both filings: Statement of Account and Solvency and Annual Return, each filed with the Registrar.

  • Forgetting that the LLP agreement can change the default rules.

    Students memorise the default profit-sharing rule as fixed.

    Fix: Say the default rules apply only when there is no agreement.

Worked examples

Example 1

State any five differences between a Limited Liability Partnership and a partnership firm.

Show the solution
  1. Status: an LLP is a body corporate and a separate legal entity. A firm is not a separate legal entity from its partners.
  2. Liability: an LLP partner's liability is limited to the agreed contribution. Firm partners have unlimited liability, joint and several.
  3. Succession: an LLP has perpetual succession. A firm is generally affected by a partner's death, retirement or insolvency.
  4. Governing law: an LLP is governed by the LLP Act 2008. A firm is governed by the Indian Partnership Act 1932.
  5. Registration: an LLP must be registered with the Registrar. Registration of a firm is optional.

Answer: An LLP differs from a firm in legal status, liability, succession, governing law and compulsory registration. In short, an LLP is a separate legal entity with limited liability and perpetual succession, and a firm is not.

Example 2

Briefly explain the accounting and filing requirements of an LLP under the LLP Act 2008.

Show the solution
  1. Books: an LLP must keep proper books of account on cash or accrual basis and on double entry, for each financial year.
  2. Statement: it prepares a Statement of Account and Solvency for the year, signed by the designated partners, showing the state of affairs and a declaration on solvency.
  3. Annual Return: it prepares an Annual Return and files it with the Registrar within the prescribed time.
  4. Audit: the accounts must be audited only if turnover or contribution exceeds the prescribed limits.
  5. Filing: the documents are filed with the Registrar within the time limits prescribed, and late filing attracts additional fees.

Answer: An LLP keeps proper double-entry books, prepares a Statement of Account and Solvency and an Annual Return, files them with the Registrar, and gets accounts audited only above the prescribed limits.

Exam tips

  • Practise the pair-wise comparison of LLP and partnership firm. It is the most likely question.
  • Name the Act correctly: Limited Liability Partnership Act, 2008. Do not cite section numbers unless sure.
  • Learn the prescribed audit limits and filing due dates from your latest study material, since they can change.
  • Write each difference as a short line with both sides, so the examiner can award one mark per point.
  • Use bold headings or underline the key terms such as body corporate, perpetual succession, and Statement of Account and Solvency.

Practice questions from Partnership and LLP Accounts

Limited Liability Partnership (LLP) Accounts: frequently asked questions

What is an LLP in simple words?

It is a registered business form under the LLP Act 2008. It is a separate legal entity, and partners have limited liability. Its internal working is like a partnership, based on an agreement.

What is the main difference between an LLP and a partnership firm?

An LLP is a separate legal entity with limited liability and perpetual succession. A partnership firm is not separate from its partners, and partners have unlimited liability.

Is an audit compulsory for an LLP?

Not always. Audit is required only if turnover or contribution exceeds the limits prescribed. Check the latest limits in your study material.

What are the two annual filings of an LLP?

The Statement of Account and Solvency and the Annual Return. Both are filed with the Registrar each year within the prescribed time.