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CMA Intermediate · Financial Accounting · Accounting of Limited Liability Partnership

Ganesh Traders and Associates, a business that is not incorporated as an LLP, carries on business under the name 'Ganesh Traders LLP'. Under the LLP Act, 2008, what is the consequence?

Each person carrying on business under a name ending in LLP without being incorporated as an LLP is punishable with a fine of at least Rs 50,000, extendable to Rs 5 lakh, under Section 20 of the LLP Act, 2008.

  1. ANo consequence, as the name is only a trade style
  2. BFine of not less than Rs 50,000 which may extend to Rs 5 lakh on each person carrying on businessCorrect
  3. CFine of not less than Rs 5 lakh which may extend to Rs 50 lakh on the firm only
  4. DAutomatic conversion into an LLP after one year

Explanation

Section 20 punishes any person or persons carrying on business under a name ending in 'LLP' or 'Limited Liability Partnership' without being incorporated as an LLP. The fine is at least Rs 50,000, extending to Rs 5 lakh, and applies to that person or each of those persons. The other options misstate the amount, the persons liable or the effect.

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