Business Laws and Ethics · Limited Liability Partnership Act, 2008

Extent of Liability of LLP and Partners

Updated 10 October 2026 · Fact-checked

An LLP is a separate body whose obligations are solely its own, met from its own property (Section 27). A partner is not personally liable merely for being a partner (Section 28), but is liable for his own wrongful act, and without limit for fraud (Section 30). Answer by sorting the act into contract, wrong or fraud.

Understand Extent of Liability of LLP and Partners

An LLP has its own legal identity. When it signs a contract or owes money, the debt is the LLP's debt. Creditors look to the LLP's property, not to the partners' homes or savings. This is what limited liability means here.

Section 27(3) says an obligation of the LLP, whether in contract or otherwise, is solely the obligation of the LLP. Section 27(4) adds that its liabilities are met out of the property of the LLP. Section 28(1) then says a partner is not personally liable for such an obligation solely by reason of being a partner.

The protection has limits. Under Section 28(2), a partner stays personally liable for his own wrongful act or omission. But he is not personally liable for the wrongful act or omission of any other partner. This differs from an ordinary partnership, where partners are jointly and severally liable for each other's acts.

The LLP is also answerable for its partners. Under Section 27(2), if a partner is liable to any person for a wrongful act or omission in the course of the LLP's business or with its authority, the LLP is liable too. Under Section 27(1), the LLP is not bound by an unauthorised act only if the partner had no authority and the outsider knew that, or did not know or believe him to be a partner.

Fraud removes the shield. Under Section 30(1), where the LLP or any partner acts with intent to defraud creditors or any other person, or for any fraudulent purpose, the liability of the LLP and of the partners who so acted is unlimited for all or any of the LLP's debts. Innocent partners keep their protection.

Compare with a company. Members of a company risk only their unpaid share capital, and the veil can be lifted for fraud. In an LLP, a partner's exposure is his agreed contribution (Section 33), plus personal liability for his own wrong or fraud.

Key rules to remember

LLP's own obligation: Obligation of LLP (contract or otherwise) = solely the LLP's obligation, met from LLP property; Section 27(3) and 27(4). Creditors cannot ordinarily go to partners' personal assets.
Partner's status protection: Partner not personally liable for LLP's obligation solely by being a partner; Section 28(1).
Own wrong versus another's wrong: Partner liable for his own wrongful act or omission; not liable for another partner's; Section 28(2).
LLP liability for partner's wrong: Partner liable for wrong in course of LLP business or with its authority ⇒ LLP also liable; Section 27(2).
Unauthorised act: LLP not bound if (a) partner has no authority AND (b) the person knows this, or does not know or believe him to be a partner; Section 27(1). Both conditions must be met for the LLP to escape.
Fraud: Fraud ⇒ unlimited liability of the LLP and of the partners who acted with fraudulent intent; Section 30(1). The LLP is liable to the same extent as the partner unless it proves the act was without its knowledge or authority.
Fraud penalty: Imprisonment up to five years and fine of ₹50,000 to ₹5,00,000; Section 30(2). Applies to every person knowingly a party to carrying on the business fraudulently.
Fraud compensation: LLP, partner, designated partner or employee who acted fraudulently pays compensation for loss; Section 30(3). The LLP is not liable if the person acted fraudulently without its knowledge.
Contribution: Obligation to contribute = as per LLP agreement; Section 33(1). A creditor who relied on it, without notice of a compromise between partners, may enforce the original obligation (Section 33(2)).

How to solve Extent of Liability of LLP and Partners questions

Use the same sorting method for every case-study or short-note question on liability.

1Identify who is being sued: the LLP, the partner who acted, or an innocent partner.
2Classify the claim: an ordinary debt or contract, a wrongful act or omission, or fraud.
3For an ordinary debt, apply Sections 27(3), 27(4) and 28(1): only the LLP is liable, from its property.
4For a wrongful act, apply Section 28(2): the wrongdoer is personally liable, the other partners are not, and the LLP is liable under Section 27(2) if it was in the course of business or authorised.
5If authority is in doubt, test Section 27(1): the LLP escapes only if the partner had no authority and the third party knew it or did not know or believe him to be a partner.
6For fraud, apply Section 30: unlimited liability for the LLP and for the partners who acted fraudulently, plus penalty and compensation. Check the proviso on the LLP's lack of knowledge.
7State the conclusion for each party separately and cite the section.

Quickest way: Three-box sort: Debt, Wrong, Fraud

When to use it: For MCQs and short case studies where you must decide quickly who pays.

Debt box: only the LLP pays. No partner is personally liable.
Wrong box: the guilty partner pays personally, the LLP also pays if it was in business or authorised, and other partners are safe.
Fraud box: no limit for the LLP and the fraudulent partners; innocent partners stay protected.
Read the facts for words such as 'intent to defraud' or 'without authority' to pick the box.

Common mistakes in Extent of Liability of LLP and Partners

Saying every partner is personally liable for the LLP's debts like in a firm.
Students carry over the rule of joint and several liability from the Partnership Act.
Fix: Remember that Section 27(3) makes the obligation solely the LLP's and Section 28(1) protects partners.
Saying a partner is liable for another partner's wrongful act.
Students confuse the LLP's liability with the innocent partner's liability.
Fix: Section 28(2) says a partner is not personally liable for another partner's wrong. The LLP is liable, not that partner.
Saying a partner has no personal liability at all.
Students over-read the limited liability slogan.
Fix: Add that he remains liable for his own wrongful act or omission and, if fraud is involved, without limit.
Applying unlimited liability to all partners in a fraud.
The word 'unlimited' makes students apply it to everyone.
Fix: Section 30(1) applies to the LLP and the partners who acted with fraudulent intent. Innocent partners are not covered.
Saying the LLP escapes whenever the partner lacked authority.
Students read only clause (a) of Section 27(1).
Fix: The LLP escapes only if both clauses hold: no authority, and the other person knew it or did not know or believe him to be a partner.
Forgetting the fraud penalty and compensation.
Students stop at unlimited liability.
Fix: Add Section 30(2) imprisonment up to five years with fine of ₹50,000 to ₹5,00,000, and Section 30(3) compensation.

Worked examples

Example 1

Rahul and Meera are partners in Shree Traders LLP. The LLP owes ₹8,00,000 to a supplier and its assets are worth only ₹3,00,000. The supplier wants to recover the balance from Rahul's personal property. Advise.

Show the solution

The debt arises from a contract of the LLP, so it is the LLP's obligation.
Under Section 27(3) the obligation is solely the LLP's, and under Section 27(4) it is met from LLP property.
Under Section 28(1), Rahul is not personally liable merely because he is a partner.
No fraud or personal wrong by Rahul is stated, so Section 30 and Section 28(2) do not apply.
The supplier can recover only from the LLP's property. The shortfall is ₹8,00,000 − ₹3,00,000 = ₹5,00,000.

Answer: The supplier cannot proceed against Rahul's personal property. Recovery is limited to the LLP's assets of ₹3,00,000, and the ₹5,00,000 shortfall remains unrecovered from the partners, unless Rahul is shown to have acted fraudulently or the LLP agreement creates a contribution obligation on which the creditor relied (Section 33).

Example 2

Arjun, a partner of Kaveri Consultants LLP, negligently gives wrong advice to a client while handling the LLP's work, causing the client a loss. Sanjay, another partner, took no part in it. Who is liable?

Show the solution

The act is a wrongful act or omission in the course of the LLP's business.
Under Section 28(2), Arjun is personally liable for his own wrongful act.
Under Section 27(2), the LLP is also liable because Arjun is liable for a wrong done in the course of its business.
Under Section 28(2), Sanjay is not personally liable for the wrongful act of another partner.
No fraudulent intent is stated, so Section 30 does not apply.

Answer: Arjun is personally liable and the LLP is liable as well. Sanjay is not personally liable, and his exposure is confined to his agreed contribution to the LLP.

Exam tips

Quote the section number with each point: 27(3), 27(4), 28(1), 28(2), 30(1). It earns step marks.
In case studies, answer for each party separately: LLP, wrongdoer, innocent partner.
For MCQs, watch the words 'solely by reason of being a partner' and 'for his own wrongful act'. They mark the limits of the protection.
When writing on fraud, include unlimited liability, the proviso for the LLP's lack of knowledge, the penalty under Section 30(2) and compensation under Section 30(3).
In compare-and-contrast answers, set out LLP partner against firm partner against company member in a short two-line contrast.

Practice questions from Limited Liability Partnership Act, 2008

Extent of Liability of LLP and Partners in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ExecutiveExtent of Liability and Financial Disclosures

Extent of Liability of LLP and Partners: frequently asked questions

What does Section 27 of the LLP Act say?

It deals with the extent of the LLP's liability. The LLP is not bound by an unauthorised act in the circumstances in Section 27(1). It is liable for its partner's wrongful acts in the course of its business, and its obligations are solely its own, met from its property.

Is a partner in an LLP liable for fraud?

Yes. Under Section 30, the LLP and the partners who acted with intent to defraud or for a fraudulent purpose have unlimited liability for its debts. Persons knowingly party to the fraud face imprisonment up to five years and a fine of ₹50,000 to ₹5,00,000.

Is a partner liable for another partner's wrongful act in an LLP?

No. Section 28(2) says a partner is not personally liable for the wrongful act or omission of any other partner. He is liable for his own. The LLP itself may be liable under Section 27(2).

How does LLP liability differ from a company's?

Both give limited liability, but an LLP partner's exposure is his contribution under the LLP agreement. In both, fraud can remove the protection. In an LLP, Section 30 states this expressly, and a partner stays personally liable for his own wrongful acts.