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CA Intermediate · Corporate and Other Laws · The Limited Liability Partnership Act, 2008

Anita Verma and Sunil Rao form Orchid Analytics LLP. The LLP agreement is silent on how the partners are to share profits and on whether any partner gets remuneration. Anita has contributed much more capital than Sunil and manages the day-to-day work. Under the LLP Act, 2008, what is the correct position regarding the rights of the partners?

Profits are shared equally and no partner gets remuneration. When the LLP agreement is silent, the default provisions of the First Schedule apply, which give all partners equal rights in profits and deny any remuneration for participating in the business, regardless of capital contributed.

  1. AProfits are shared in proportion to capital contributed, and Anita is entitled to a managerial remuneration
  2. BProfits are shared equally, and no partner is entitled to remunerationCorrect
  3. CProfits are shared equally, and Anita as the managing partner is entitled to reasonable remuneration
  4. DProfits are shared in the ratio decided by the Registrar of Companies, and no remuneration is payable

Explanation

Where the LLP agreement is silent, the First Schedule default rules apply: all partners are entitled to share equally in capital and profits, and no partner is entitled to remuneration for taking part in the business. Capital contribution does not alter the ratio. The option giving profit in proportion to capital wrongly imports a rule that the Act does not provide.

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