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CA Foundation · Business Laws · The Limited Liability Partnership Act, 2008

Four friends from Surat form an LLP, Veda Textiles LLP, in the business of fabric trading. Which of the following statements about the nature of the LLP is correct?

Every partner of an LLP is an agent of the LLP only, not of the other partners. This protects an innocent partner from being bound by another partner's independent wrongful act. An LLP also needs incorporation and has no minimum capital requirement.

  1. AThe LLP is created by an agreement and automatically comes into existence without registration
  2. BEvery partner of the LLP is an agent of the LLP and not of the other partnersCorrect
  3. CEvery partner of the LLP is an agent of the other partners and bound by their acts
  4. DThe LLP must have a minimum paid-up capital of ₹1 lakh to be incorporated

Explanation

Under the LLP Act, a partner is the agent of the LLP, not of other partners. This is why one partner's independent misconduct does not make others liable. An LLP exists only on incorporation, and no minimum capital is prescribed.

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