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CMA Intermediate · Business Laws and Ethics · Limited Liability Partnership Act, 2008

Anita Traders runs a business as a sole proprietor under the name 'Anita Traders LLP' without being incorporated as a limited liability partnership. What is the consequence under the Act?

The proprietor is punishable with a fine of at least fifty thousand rupees, which may extend to five lakh rupees. The Act penalises carrying on business under a name ending with LLP or Limited Liability Partnership unless the entity is duly incorporated as an LLP.

  1. ANo consequence, since a name is only a trade label
  2. BThe person is punishable with fine of not less than fifty thousand rupees, extendable to five lakh rupeesCorrect
  3. CThe person is punishable with fine of not less than one lakh rupees, extendable to ten lakh rupees
  4. DThe business is automatically converted into an LLP

Explanation

Section 20 punishes anyone carrying on business under a name ending in 'LLP' or 'Limited Liability Partnership' (or a contraction or imitation) unless duly incorporated. The fine is at least Rs 50,000 and may extend to Rs 5 lakh. No automatic conversion exists.

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