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CA Intermediate · Corporate and Other Laws · The Limited Liability Partnership Act, 2008

Meera and Karthik are the only partners of Lotus Designs LLP, which has a turnover of Rs 20 lakh. Karthik moves abroad and the LLP is left with only Meera as its sole partner for more than six months. Meera continues the business and knows about the position. Which statement correctly states the legal position under the LLP Act, 2008?

Meera becomes personally liable, jointly and severally with the LLP, for obligations incurred after the six-month period, because she carried on business knowing the LLP had fewer than two partners. The LLP does not dissolve automatically, and her limited liability protection is lost for that period.

  1. AThe LLP stands automatically dissolved as soon as the number of partners falls below two
  2. BMeera alone is personally liable for all obligations of the LLP incurred after the six-month period, jointly and severally with the LLP, if she carries on business with knowledgeCorrect
  3. CMeera is protected by limited liability as long as the LLP remains registered
  4. DThe LLP converts into a sole proprietorship by operation of law and its registration is cancelled by the Registrar

Explanation

If an LLP carries on business with fewer than two partners for more than six months and the person knows this, that person is personally liable for the LLP's obligations incurred during that period after six months. The LLP does not dissolve automatically, so option A is wrong. Limited liability protection is lost in this case, so option C is wrong.

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