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

Anita and Karan are partners in Greenleaf Solutions LLP. Karan retires and Divya is admitted as a new partner. Which statement about the LLP is correct?

A change in partners does not affect the existence, rights or liabilities of an LLP, because it is a body corporate with perpetual succession. Contracts continue, and the LLP is neither dissolved nor required to be reincorporated when a partner retires and another is admitted.

  1. AThe LLP must be reconstituted as a new entity because a partner has changed
  2. BThe existence, rights and liabilities of the LLP are not affected by the change in partnersCorrect
  3. CThe LLP's existing contracts lapse and must be renewed
  4. DThe LLP is dissolved automatically on a partner's retirement

Explanation

An LLP is a body corporate with perpetual succession. Any change in its partners does not affect its existence, rights or liabilities. Hence contracts continue and no dissolution or fresh incorporation is needed. The options suggesting lapse or dissolution confuse the LLP with a traditional partnership.

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