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

Kavita is a partner in Horizon Exports LLP. The LLP defaulted on a bank loan of ₹40 lakh, and the bank wants to recover the dues from Kavita's personal flat. Her contribution to the LLP was ₹5 lakh and she committed no fraud. What is the position?

Kavita's personal flat cannot be attached for the LLP's loan. An LLP's debts are met from its own assets, and a partner's liability is limited to the agreed contribution. Since she committed no fraud, she is not personally liable for the bank's dues.

  1. AKavita's personal assets are not liable for the LLP's debt; her liability is limited to her agreed contributionCorrect
  2. BKavita is personally liable for the full ₹40 lakh jointly with other partners
  3. CKavita is liable for ₹35 lakh, being the loan less her contribution
  4. DKavita is liable only if she is a designated partner

Explanation

An LLP's liabilities are met out of its own assets. A partner's liability is limited to the agreed contribution, and a partner is not personally liable for the LLP's obligations arising from contracts. Here there is no fraud by Kavita. Unlimited joint liability applies in an ordinary firm, not in an LLP.

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