Business Laws and Management · Elements of Law relating to Partnership and Limited Liability Partnership

LLP Agreement, Conversion and Winding Up Explained

Updated 11 October 2026 · Fact-checked

An LLP is run under its LLP agreement, which governs the mutual rights and duties of its partners. A firm can convert into an LLP by registration under the Second Schedule, after which its assets vest in the LLP. An LLP is wound up voluntarily or by the Tribunal, then dissolved. Learn the section numbers and conditions.

Understand LLP Partners, Agreement, Conversion and Winding Up

A Limited Liability Partnership (LLP) is a body registered under the Limited Liability Partnership Act, 2008. It mixes features of a partnership and a company. It has a separate legal identity, and each partner's liability is limited, unlike the personal liability of a partner in an ordinary firm. The Act extends to the whole of India (Section 1).

The heart of an LLP is its LLP agreement. Under Section 23, the mutual rights and duties of the partners, and of the LLP and its partners, are governed by this agreement, save as the Act otherwise provides. The agreement and any change in it must be filed with the Registrar. If the agreement is silent on a matter, the rules in the First Schedule to the Act apply. A written agreement made before incorporation can bind the LLP only if all partners ratify it after incorporation.

A partner's share of profits, losses and distributions is transferable, wholly or in part (Section 42). But the transfer does not make the partner leave, does not dissolve the LLP, and does not give the transferee any right to manage the LLP or to see information about its transactions.

Conversion: a firm may convert into an LLP under Section 55, following the Second Schedule. When the Registrar is satisfied, the documents are registered and a certificate of registration is issued (Section 58). From the date in the certificate, the LLP exists, all property, rights and liabilities of the firm vest in it without further act or deed, and the firm is deemed dissolved and removed from the Registrar of Firms' records. The LLP must inform that Registrar within fifteen days of registration.

Winding up: under Section 63, an LLP may be wound up voluntarily or by the Tribunal, and an LLP so wound up may be dissolved. Section 51 lets the Central Government, in certain cases, present a petition to the Tribunal on the ground that winding up is just and equitable. Section 65 lets the Central Government make rules on winding up and dissolution.

Note on 'savings': Section 74 belongs to the Indian Partnership Act, 1932, not the LLP Act. It saves rights, liabilities, legal proceedings and things done before that Act began, along with other partnership enactments not expressly repealed, insolvency rules on partnership, and any rule of law not inconsistent with the Act.

Key formulas to remember

Governing document (LLP Act, Section 23): Mutual rights and duties = LLP agreement; if agreement is silent → First Schedule; Agreement and its changes must be filed with the Registrar. A pre-incorporation agreement binds the LLP only if all partners ratify it after incorporation.
Transfer of partner's interest (Section 42): Transfer of profit share ≠ dissolution, ≠ disassociation, ≠ right to manage or access information; The transferee gets only the economic rights that were transferred.
Conversion of firm (Sections 55 and 58): Firm + Second Schedule compliance → Registrar's certificate → LLP exists; property vests; firm deemed dissolved; The LLP must inform the Registrar of Firms within 15 days of registration. Vesting happens without further assurance, act or deed.
Winding up of LLP (Section 63): Winding up = voluntary or by Tribunal; then dissolution; Only two modes are named in this section.
Application for winding up (Section 51): Central Government + report under Section 49 + expedient → petition to Tribunal on just and equitable ground; Not available if the LLP is already being wound up by the Tribunal.
Rule-making power (Section 65): Central Government may make rules on winding up and dissolution; Do not confuse with Section 63, which names the modes of winding up.
Misuse of the name (Section 20): Fine of ₹50,000 to ₹5 lakh for using 'LLP' as last word of name without incorporation; Applies to each person carrying on business under such a name.
Savings (Indian Partnership Act, Section 74): Pre-commencement rights, liabilities, proceedings and acts are saved; This is a Partnership Act provision, not an LLP Act provision.

How to solve LLP Partners, Agreement, Conversion and Winding Up questions

Most questions on this topic test one rule and one trap. Use this method to find both quickly.

1Identify the Act. Decide whether the question is about the Indian Partnership Act, 1932 or the LLP Act, 2008. Section 74 savings and Section 51 premium refund are Partnership Act; the rest of this topic is mostly LLP Act.
2Identify the stage: agreement, partner's rights, conversion, or winding up and dissolution.
3Recall the rule in plain words for that stage using the key rules above.
4Check the condition words: 'unless', 'only', 'within fifteen days', 'wholly or in part', 'just and equitable'.
5Check the numbers: 15 days, ₹50,000 and ₹5 lakh, and the section numbers.
6For MCQs, eliminate options that confuse the Acts or overstate a right, such as the transferee managing the LLP.
7For a written answer, state the rule, name the section, then apply it in one or two lines to the facts.

Quickest way: Keyword-match method for Paper 4 MCQs

When to use it: Use it for one-mark OMR questions where you have about a minute per question.

Spot the trigger word: 'agreement' → Section 23; 'transfer of share' → Section 42; 'conversion' → Sections 55 and 58; 'winding up' → Sections 63, 51, 65; 'savings' → Partnership Act Section 74.
Recall the one-line rule tied to that word.
Cross out any option that gives the transferee management rights, says conversion keeps the firm alive, or places Section 74 in the LLP Act.
If two options remain, check the number or condition word, such as 15 days.
Mark an answer. There is no negative marking in Paper 4, so never leave a question blank.

Common mistakes in LLP Partners, Agreement, Conversion and Winding Up

Treating Section 74 as part of the LLP Act, 2008.
Students search 'LLP Act savings' and assume the section is in the same Act.
Fix: Remember: savings Section 74 is in the Indian Partnership Act, 1932. The LLP Act's conversion provisions are Sections 55 and 58.
Saying that transferring a profit share dissolves the LLP or makes the transferee a partner with management rights.
Students carry over the idea that a change of partners ends an ordinary firm.
Fix: Under Section 42, transfer does not cause disassociation or dissolution, and the transferee gets no right to manage or to access information.
Thinking the firm continues to exist after conversion.
The word 'conversion' sounds like a change of form only.
Fix: Under Section 58(4), the firm is deemed dissolved and removed from the Registrar of Firms' records. Its property and liabilities vest in the LLP.
Mixing up Section 63 and Section 65.
Both deal with winding up and sit close together.
Fix: Section 63 names the modes: voluntary or by the Tribunal. Section 65 only gives the Central Government power to make rules.
Believing anyone can petition under Section 51.
Students remember 'just and equitable' but forget who applies.
Fix: Under Section 51, the Central Government causes a petition to be presented to the Tribunal by a person it authorises, and only if the LLP is not already being wound up by the Tribunal.
Ignoring the First Schedule when the agreement is silent.
Students assume the Partnership Act fills the gap.
Fix: Under Section 23(4), the First Schedule to the LLP Act applies where the agreement is silent.

Worked examples

Example 1

MCQ: A partnership firm converts into an LLP and receives the Registrar's certificate of registration. Within how many days of the date of registration must the LLP inform the Registrar of Firms with which the firm was registered? (a) 15 days (b) 30 days (c) 60 days (d) 90 days

Show the solution

Identify the stage: conversion of a firm into an LLP, governed by Sections 55 and 58 of the LLP Act.
Recall the proviso to Section 58(1): the LLP must inform the concerned Registrar of Firms or Registrar of Companies about the conversion and its particulars.
The time limit in the proviso is fifteen days from the date of registration.
Eliminate 30, 60 and 90 days; none matches the proviso.

Answer: (a) 15 days

Example 2

Written: Meera is a partner in Sharma Traders LLP, Pune. She transfers her entire share of profits to her friend Karan under the LLP agreement. Karan now demands to attend management meetings and inspect the LLP's records. Advise whether the LLP is dissolved and whether Karan's demand is valid.

Show the solution

Rule: Under Section 42(1), a partner's right to a share of profits and losses and to receive distributions is transferable, wholly or in part.
Effect on the LLP: Under Section 42(2), the transfer does not by itself cause the partner's disassociation or the dissolution and winding up of the LLP. So the LLP is not dissolved.
Effect on Karan: Under Section 42(3), the transfer does not by itself entitle the transferee to take part in management or conduct of the LLP's activities, or to access information about its transactions.
Apply: Karan has only the transferred economic rights. His demand to attend management meetings and inspect records is not valid merely because of the transfer.

Answer: The LLP is not dissolved, and Karan cannot claim management or information rights by reason of the transfer alone (Section 42).

Exam tips

Learn the Act that each section belongs to. Savings Section 74 and premium refund Section 51 are Partnership Act; Sections 51, 55, 58, 63 and 65 here are LLP Act.
Memorise the numbers: 15 days for informing the Registrar after conversion, and a fine of ₹50,000 to ₹5 lakh for misuse of 'LLP' in a name.
Read each option for overstated rights. Options that give a transferee management power or say the firm survives conversion are usually wrong.
In written answers, state the rule first, cite the section, then apply it to the named parties in one or two lines.
Attempt every Paper 4 question. There is no negative marking in the OMR paper.

Practice questions from Elements of Law relating to Partnership and Limited Liability Partnership

LLP Partners, Agreement, Conversion and Winding Up in other exams

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

LLP Partners, Agreement, Conversion and Winding Up: frequently asked questions

Is Section 74 part of the LLP Act, 2008?

No. Section 74 titled 'Savings' is in the Indian Partnership Act, 1932. It protects rights, liabilities and proceedings that arose before that Act began, and rules of law not inconsistent with it.

What is the importance of the LLP agreement?

Under Section 23 of the LLP Act, the agreement governs the mutual rights and duties of the partners and of the LLP and its partners. It and any changes must be filed with the Registrar. If it is silent on a matter, the First Schedule applies.

What happens to the firm's property when it converts into an LLP?

On the date in the certificate of registration, all property, assets, rights and liabilities of the firm vest in the LLP without further assurance, act or deed. The firm is deemed dissolved and removed from the Registrar of Firms' records (Section 58(4)).

How is an LLP wound up?

Under Section 63, winding up is either voluntary or by the Tribunal, and an LLP so wound up may be dissolved. Section 51 allows the Central Government, in certain cases, to have a petition presented to the Tribunal on the just and equitable ground.