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

Kavya LLP, a registered LLP in Chennai, has a partner Lalit who contributed ₹5 lakh. The LLP incurs debts of ₹40 lakh and its assets fall short. Lalit did not act fraudulently. Which statement about Lalit's liability is correct?

Lalit's liability is limited to his agreed contribution in the LLP, here ₹5 lakh. Because the LLP is a separate legal entity, its debts are met from its own assets, and a partner's personal property is safe unless he acted fraudulently or wrongfully himself.

  1. AHis liability is limited to his agreed contribution to the LLPCorrect
  2. BHe is liable for the full ₹40 lakh personally
  3. CHe is liable for half the debts, ₹20 lakh, personally
  4. DHe is liable only if he was a designated partner

Explanation

A partner's liability is limited to the agreed contribution to the LLP. Personal assets are not exposed for the LLP's debts, absent fraud or his own wrongful act. Unlimited personal liability belongs to partners of an ordinary firm, so the other options are wrong.

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