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

A group of traders carries on business under the name 'Shree Ganesh Traders LLP' but has never been incorporated as a limited liability partnership. Under the Limited Liability Partnership Act, 2008, what is the consequence?

Each person carrying on business under a name ending in LLP without being incorporated as a limited liability partnership is punishable with a fine of not less than fifty thousand rupees, extending up to five lakh rupees, as the Act penalises improper use of the words.

  1. AEach of them is punishable with a fine of not less than fifty thousand rupees but which may extend to five lakh rupeesCorrect
  2. BThey are punishable with imprisonment of up to one year only, with no fine
  3. CThe business is automatically treated as a registered LLP after one year
  4. DOnly the partner who first used the name is liable to a fine of ten thousand rupees

Explanation

Section 20 provides that persons carrying on business under a name ending in 'Limited Liability Partnership' or 'LLP' (or a contraction or imitation) without being duly incorporated as an LLP are each punishable with a fine of at least Rs 50,000, extending to Rs 5 lakh. The penalty applies to each person, not just one, and no automatic registration arises.

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