Setting Up of Business, Industrial and Labour Laws · Limited Liability Partnership

Introduction and Nature of LLP under the LLP Act, 2008

Updated 11 October 2026 · Fact-checked

An LLP is a partnership formed and registered under the LLP Act, 2008. Under Section 3 it is a body corporate and a legal entity separate from its partners, with perpetual succession. Change in partners does not affect its existence, rights or liabilities. To answer questions, state the provision, apply it, then conclude.

Understand Introduction and Nature of LLP

A limited liability partnership (LLP) is a hybrid. It gives the flexibility of a partnership and the separate legal identity of a company. Section 2(1)(n) defines it as a partnership formed and registered under the Act. It exists only after registration.

Section 3(1) is the core rule. An LLP is a body corporate formed and incorporated under the Act, and a legal entity separate from its partners. So the LLP owns property, enters contracts and sues or is sued in its own name. The partners are not the LLP.

Section 3(2) gives perpetual succession. Section 3(3) says any change in partners does not affect the existence, rights or liabilities of the LLP. Death, retirement or admission of a partner does not end the LLP. This is a big difference from a partnership firm, which has no separate existence from its partners.

Other features follow from the Act. Any individual or body corporate can be a partner (Section 5), except an individual who is of unsound mind as found by a court and the finding is in force, an undischarged insolvent, or one whose insolvency application is pending. The name must end with the words "limited liability partnership" or "LLP" (Section 15). The LLP agreement is a written agreement fixing mutual rights and duties (Section 2(1)(o)). The partners' liability is limited to their agreed contribution, as taught in the chapter on liability.

Compared with a company, an LLP is run by its partners through the LLP agreement, and has no shares, board or directors. Partners are the agents of the LLP. Compared with a firm, an LLP has separate legal identity, perpetual succession and registration is mandatory.

Key rules to remember

Section 3(1): Status: LLP = body corporate + legal entity separate from its partners; Formed and incorporated under the LLP Act, 2008.
Section 3(2): Succession: LLP has perpetual succession; It continues despite death, retirement or insolvency of partners.
Section 3(3): Change of partners: Change in partners ⇒ no effect on existence, rights or liabilities of the LLP; Quote this when the question mentions a partner's death or exit.
Section 15(1): Name: Last words of the name = "limited liability partnership" or "LLP"; Section 20 fines a business that uses these words without being incorporated as an LLP: not less than ₹50,000, up to ₹5,00,000.
Section 5: Who can be a partner: Any individual or body corporate; except an individual of unsound mind (court finding in force), an undischarged insolvent, or one whose insolvency application is pending; The disqualifications apply to individuals only.

How to solve Introduction and Nature of LLP questions

Use this method for any question on the nature of an LLP or a comparison with a firm or company.

1Read the question and mark the issue: status, succession, partners, name or a comparison.
2State the provision in plain words, with the section number (Section 3 for status and succession).
3List the relevant features: body corporate, separate legal entity, perpetual succession, written LLP agreement.
4Apply them to the facts. For example, if a partner dies, apply Section 3(3).
5For a comparison, pick 5 to 6 points such as legal status, succession, registration, management, partners and liability, and contrast each side.
6Write a clear conclusion that answers the exact question asked.

Quickest way: Section 3 plus comparison grid

When to use it: Short-note and difference questions with limited time.

Open with: LLP is a body corporate and a separate legal entity (Section 3(1)).
Add perpetual succession and the effect of change in partners (Section 3(2) and (3)).
For differences, write a two-column list of 5 points: status, succession, registration, management, shares or transferability.
Close with one line on the conclusion.

Common mistakes in Introduction and Nature of LLP

Saying an LLP is just a partnership with limited liability.
The name suggests it is a normal partnership.
Fix: Say it is a body corporate with separate legal entity under Section 3(1), unlike a firm.
Saying the LLP dissolves when a partner dies or retires.
Students carry over the rule for partnership firms.
Fix: Cite Section 3(2) and (3): perpetual succession, and change of partners does not affect the LLP.
Saying only individuals can be partners.
Students link partners with persons only.
Fix: Section 5 allows any individual or body corporate. Disqualifications apply only to individuals.
Saying an LLP has directors and shares.
Mixing up the LLP with a company.
Fix: An LLP has partners and designated partners, with rights set by the LLP agreement, not shares.
Leaving out the name rule.
It looks like a small detail.
Fix: Mention Section 15(1) and the Section 20 fine for wrongly using the words LLP.

Worked examples

Example 1

Ravi, Sunita and Mohan are partners in Vistara Consultants LLP. Mohan dies. A creditor claims the LLP has ended and refuses to deal with it. Is the creditor right?

Show the solution

Provision: Section 3(1) makes an LLP a body corporate and a legal entity separate from its partners.
Section 3(2) gives it perpetual succession.
Section 3(3) says any change in the partners does not affect the existence, rights or liabilities of the LLP.
Application: Mohan's death is a change in partners. The LLP continues with its rights and liabilities unchanged.

Answer: The creditor is wrong. Vistara Consultants LLP continues to exist under Section 3, and its rights and liabilities are unaffected by Mohan's death.

Example 2

Distinguish a limited liability partnership from a partnership firm.

Show the solution

Legal status: an LLP is a body corporate and separate legal entity (Section 3(1)). A firm is not a separate legal entity from its partners.
Succession: an LLP has perpetual succession (Section 3(2)). A firm has no such continuity.
Registration: an LLP exists only on registration under the Act. Registration of a firm is not compulsory under the Indian Partnership Act, 1932.
Partners: in an LLP any individual or body corporate may be a partner, subject to Section 5. Partnership rules are under the Partnership Act.
Name: an LLP name must end with LLP or limited liability partnership (Section 15). A firm has no such requirement.
Rights and duties: an LLP is governed by the written LLP agreement (Section 2(1)(o)). A firm's agreement may even be oral.

Answer: An LLP is a registered body corporate with separate legal identity and perpetual succession, while a firm is not a separate entity and ends with change in partners unless agreed otherwise.

Exam tips

Always quote Section 3(1), (2) and (3) in the opening lines. Examiners look for them.
For difference questions, write at least five points in a table-like list with both sides covered.
In case-based questions, apply Section 3(3) when a partner dies, retires or joins.
Give section numbers only when sure. Sections 3, 5, 15 and 20 are safe to cite.
End every answer with a one-line conclusion.

Practice questions from Limited Liability Partnership

Introduction and Nature of LLP in other exams

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

Introduction and Nature of LLP: frequently asked questions

Is an LLP a company?

No. An LLP is a body corporate under Section 3 but it is not a company. It is formed under the LLP Act, 2008, and is run by partners under an LLP agreement, not by directors and shareholders.

Does an LLP have perpetual succession?

Yes. Section 3(2) gives it perpetual succession. Under Section 3(3), change in partners does not affect its existence, rights or liabilities.

Can a company be a partner in an LLP?

Yes. Section 5 allows any individual or body corporate to be a partner. The bars on unsound mind and insolvency apply to individuals.

Can a firm use LLP in its name without registering?

No. Under Section 20, anyone using these words as the last words of a business name without being incorporated as an LLP is punishable with a fine of ₹50,000 to ₹5,00,000.