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

Ishaan is a partner in Greenleaf Agro LLP. He argues that an LLP is like a company, so it must have a share capital divided into shares. Which statement is correct about the nature of an LLP?

An LLP has no share capital or shares. Partners bring in contributions as set out in the LLP agreement, and their mutual rights and duties are governed by that agreement. It is an alternative corporate form that blends partnership flexibility with limited liability, unlike a company.

  1. AAn LLP must issue shares to its partners, just as a company does
  2. BAn LLP has no share capital; partners contribute capital as per the LLP agreement, and their rights are governed by the agreementCorrect
  3. CAn LLP must have share capital of at least ₹1 lakh to start
  4. DAn LLP can raise capital only through public issue of shares

Explanation

An LLP combines features of a partnership and a company but has no shares or share capital. Partners make contributions as agreed in the LLP agreement, and mutual rights and duties are governed by it. A fixed minimum capital is not required by the Act.

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