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

Kavya wants to know how an LLP differs from a traditional partnership firm under the Indian Partnership Act, 1932. Which statement is correct?

An LLP has perpetual succession, so its existence continues despite changes in partners, while a traditional partnership firm is not a separate legal entity and its partners bear unlimited liability. An LLP is also separate from its partners and must be incorporated.

  1. AAn LLP has perpetual succession, whereas a traditional firm's existence is tied to its partnersCorrect
  2. BA traditional firm is a separate legal entity, but an LLP is not
  3. CBoth have unlimited liability for all partners
  4. DRegistration is compulsory for a traditional firm but prohibited for an LLP

Explanation

An LLP has perpetual succession, so changes in partners do not affect its existence. A traditional firm is not a separate legal entity from its partners, and partners have unlimited liability. An LLP must be incorporated, so options B, C and D are wrong.

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