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

Ishaan and Jaya are partners in Zenith Software LLP. The LLP takes a bank loan and fails to repay it. Ishaan had not acted wrongfully or fraudulently in any way. Which statement best reflects the nature of the partners' liability?

The LLP itself is liable for its debts to the full extent of its assets, while an innocent partner's liability is limited to his agreed contribution. A partner is not personally liable for the LLP's obligations merely by being a partner, unlike partners in an ordinary firm.

  1. AIshaan is jointly and severally liable with Jaya for the entire loan from his personal assets
  2. BThe LLP is liable to the full extent of its assets, while Ishaan's liability is limited to his agreed contribution to the LLPCorrect
  3. CNeither the LLP nor the partners are liable because an LLP cannot borrow
  4. DOnly the partner who signed the loan documents is liable from personal assets

Explanation

The LLP is a separate entity and its liability extends to all its assets. A partner's liability is limited to the agreed contribution, and a partner is not personally liable for the LLP's obligations merely because of being a partner, except for his own wrongful acts. The first option describes a general partnership.

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