Setting Up of Business, Industrial and Labour Laws · Business Collaborations

Limited Liability Partnership (LLP) Basics and Features

Updated 11 October 2026 · Fact-checked

A **limited liability partnership** is a body corporate formed under the LLP Act, 2008. It is a separate legal entity with perpetual succession. Partners' liability is limited to their agreed contribution, though each is liable for their own wrongful acts. To answer exam questions, state the feature, cite the Act, then compare with a firm or company.

Understand Limited Liability Partnership (LLP) Basics

An LLP mixes two ideas. From a partnership, it takes flexibility: the partners run the business under their own agreement. From a company, it takes a separate legal identity and limited liability for the owners.

The Limited Liability Partnership Act, 2008 governs it. An LLP is a body corporate and a legal entity separate from its partners. It has perpetual succession. A change in partners does not affect its existence, rights or liabilities. It can own property and sue or be sued in its own name.

The LLP is formed by incorporation, not by a mere contract. At least two persons associating for carrying on a lawful business with a view to profit must subscribe their names to an incorporation document and file it with the Registrar. The mutual rights and duties of partners are governed by the LLP agreement. If there is no agreement, the First Schedule of the Act applies as default rules.

A partner's liability is limited to their agreed contribution. This protects partners from the LLP's debts. But the protection has limits. A partner is not shielded from liability for their own wrongful act or omission. Also, the LLP is not liable for a wrongful act of a partner done without the LLP's authority. Under Section 30, if the LLP's business is carried on with intent to defraud creditors or for a fraudulent purpose, the LLP and the partners who knowingly acted that way are liable without limit for the LLP's debts and liabilities.

An LLP must have at least two partners and at least two designated partners. Designated partners are individuals, and at least one of them must be resident in India. Where all the partners are bodies corporate, or some are individuals and some are bodies corporate, the individuals who act as designated partners may be partners or nominees of the bodies corporate. There is no upper limit on the number of partners. Partners can be individuals or bodies corporate, subject to the Act. An LLP has no share capital. Instead, partners make contributions, which may be in cash, property or other benefits.

Key rules to remember

Legal status: LLP = body corporate + separate legal entity + perpetual succession; Section 3 of the LLP Act, 2008 says an LLP is a body corporate and a legal entity separate from its partners.
Minimum partners: Minimum 2 partners; no maximum; If the number falls below two for more than six months, the remaining partner who knows this is personally liable for the LLP's obligations in that period.
Designated partners: At least 2 designated partners (individuals; where partners are bodies corporate, individual nominees act); at least 1 resident in India; Resident in India means a person who has stayed in India for at least 120 days during the financial year immediately preceding the year of appointment as designated partner.
Liability of partner: Liability = limited to agreed contribution, except for own wrongful acts; The LLP is liable for wrongful acts done in the course of its business or with its authority.
Governing agreement: LLP agreement; else First Schedule applies; The agreement is between the partners inter se and between the LLP and its partners.
Formation: Incorporation document filed with Registrar → certificate of incorporation; The LLP is conclusively formed from the date on the certificate.
Capital: No share capital; partners hold contributions; There is no minimum contribution prescribed by the Act.

How to solve Limited Liability Partnership (LLP) Basics questions

Use this method for any question on LLP features, nature or comparison.

1Read the question and identify the task: define, list features, explain advantages, or compare with a partnership or company.
2Open with the legal basis: the LLP Act, 2008 and the fact that an LLP is a body corporate.
3State each relevant feature in one line, then add one line of meaning or effect.
4For a comparison, pick clear heads such as legal status, liability, formation, number of members, management and perpetual succession, and state both sides on each.
5Apply the rule to the facts if it is a case. Name the partner or party and say who is liable and why.
6Add the limits, such as liability for one's own wrongful act or for fraud, so the answer is not one-sided.
7Close with a one-line conclusion that answers the exact question asked.

Quickest way: Feature-then-contrast method

When to use it: Use it when you have little time or the question asks for differences or advantages.

Write the anchor line: LLP is a body corporate under the LLP Act, 2008.
List four to five features as short bullets: separate entity, perpetual succession, limited liability, LLP agreement, no share capital.
For comparison, draw two columns in your answer on legal status, liability, formation and governing document.
End with the conclusion, such as: an LLP gives limited liability with partnership-style flexibility.

Common mistakes in Limited Liability Partnership (LLP) Basics

Saying an LLP is formed by a partnership deed and is governed by the Indian Partnership Act, 1932.
The word partnership makes students link it with the older law.
Fix: Remember that an LLP is incorporated under the LLP Act, 2008 and is governed by its LLP agreement. The 1932 Act applies only where the LLP Act expressly says so.
Claiming that partners have no liability at all.
Students stop at the phrase limited liability.
Fix: State that liability is limited to the agreed contribution, but a partner remains liable for their own wrongful acts and for fraud.
Saying an LLP has share capital and shareholders.
Students mix up the LLP with a company.
Fix: An LLP has partners and contributions. It has no shares, no shareholders and no minimum capital under the Act.
Stating that an LLP can have a maximum of 20 partners.
The old limit for a partnership firm is carried over.
Fix: An LLP has a minimum of two partners and no maximum.
Treating all partners as agents of each other.
This is the rule for an ordinary firm.
Fix: In an LLP, each partner is an agent of the LLP only, not of the other partners.
Forgetting that an LLP continues despite the death or exit of a partner.
In a firm, the death of a partner can dissolve it unless the contract provides otherwise.
Fix: Link perpetual succession to the LLP being a body corporate. Changes in partners do not affect its existence.

Worked examples

Example 1

Distinguish between a limited liability partnership and a partnership firm on any five points.

Show the solution

Begin with the legal basis: an LLP is governed by the LLP Act, 2008, while a firm is governed by the Indian Partnership Act, 1932.
Compare legal status: an LLP is a body corporate and a separate legal entity. A firm is not a separate entity from its partners.
Compare liability: LLP partners have liability limited to their contribution, except for their own wrongful acts. Firm partners have unlimited, joint and several liability.
Compare registration: an LLP must be incorporated with the Registrar. Registration of a firm is optional.
Compare succession: an LLP has perpetual succession. A firm is dissolved by the death of a partner unless the contract provides otherwise. The retirement of a partner does not by itself dissolve a firm, though a two-partner firm cannot continue after one partner leaves.
Compare agency: an LLP partner is an agent of the LLP only. A firm partner is an agent of the firm and of the other partners.

Answer: An LLP is a separate body corporate with perpetual succession, limited liability, compulsory incorporation under the LLP Act, 2008, and partners who are agents of the LLP only. A firm has none of these features. Its partners bear unlimited liability.

Example 2

Anil and Bhavna are partners in Sunrise Traders LLP. Anil, without the LLP's authority, signs a supply contract in the LLP's name and cheats a buyer by giving false statements. The buyer knows that Anil has no authority to bind the LLP. The buyer claims against the LLP and against Bhavna. Advise.

Show the solution

The rule: an LLP is a separate body corporate. A partner is an agent of the LLP, not of the other partners.
The LLP is liable for a wrongful act of a partner done in the course of its business or with its authority. An outsider can normally rely on a partner's apparent authority.
That protection is lost when the partner has no authority and the outsider knows it. Here Anil had no authority and the buyer knew this, so the LLP is not liable.
Bhavna is not liable for Anil's independent wrongful act. Her liability is limited to her agreed contribution in any case.
Anil is personally liable for his own wrongful act. Limited liability does not protect a partner from the consequences of their own wrongful act or omission.
Apply to the facts: Anil acted without authority, the buyer knew it, and Anil made false statements.

Answer: The buyer cannot successfully claim against the LLP or against Bhavna on these facts, because Anil had no authority and the buyer knew it. Anil alone is personally liable for the loss caused by his own wrongful act. If the buyer had not known of the lack of authority and the act was in the ordinary course of business, the LLP would also be liable.

Exam tips

Start every answer with the Act: LLP Act, 2008 and the body corporate status. It sets up the rest of your answer.
For difference questions, use at least five clear heads and cover both sides on each. Do not write one-sided points.
In case-based questions, name the partner and state who is liable and why. The conclusion earns marks.
Do not give a section number unless you are sure of it. A correct rule without a section is safer than a wrong section.
Mention the limits on limited liability, such as own wrongful acts and fraud, to show a complete understanding.

Practice questions from Business Collaborations

Limited Liability Partnership (LLP) Basics in other exams

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

Limited Liability Partnership (LLP) Basics: frequently asked questions

What is a limited liability partnership?

It is a body corporate formed under the LLP Act, 2008. It has a separate legal identity and perpetual succession. Its partners enjoy limited liability, while being able to manage the business themselves.

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

An LLP is a separate legal entity with limited liability for partners. A firm is not separate from its partners, who have unlimited liability. An LLP must be incorporated, while registering a firm is optional.

What is the main difference between an LLP and a company?

A company is owned by shareholders through share capital and run by directors under the Companies Act, 2013. An LLP is owned and managed by partners through contributions under its LLP agreement. Both are separate legal entities.

Does an LLP need a minimum capital?

The LLP Act, 2008 does not prescribe any minimum contribution. Partners decide the contribution in the LLP agreement.

Is the LLP Act important for CS Executive Paper 3?

Yes. LLP is part of the Setting Up of Business syllabus in Paper 3. Expect to explain its features, advantages and differences from a firm or company in a written answer.