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CS Executive · Setting Up of Business, Industrial and Labour Laws · Limited Liability Partnership

Mehta & Rao Traders, a firm that is not registered as an LLP, begins carrying on business under the name 'Mehta Rao Traders LLP'. Under the LLP Act, 2008, what is the consequence for the persons carrying on that business?

Persons using 'LLP' as the last word of their business name without being incorporated as an LLP are each punishable with a fine of at least fifty thousand rupees, which may extend to five lakh rupees. The Act provides no automatic conversion.

  1. ANo consequence, because LLP is only an abbreviation
  2. BEach such person is punishable with a fine of at least Rs 50,000, extendable to Rs 5 lakhCorrect
  3. CEach such person is punishable only with imprisonment of one year
  4. DThe business is automatically treated as an LLP after one year

Explanation

Section 20 punishes persons carrying on business under a name ending in 'LLP' or 'Limited Liability Partnership' when not duly incorporated as an LLP. The fine is not less than Rs 50,000 and may extend to Rs 5 lakh. The Act does not provide imprisonment or automatic conversion.

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