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CSEET · Business Laws and Management · Elements of Law relating to Partnership and Limited Liability Partnership

Mehta Traders, a partnership, starts trading as 'Mehta Traders LLP' although it was never incorporated as a limited liability partnership. Which statement is correct under the LLP Act, 2008?

Each person carrying on the business under the name ending in LLP, without being incorporated as an LLP, is punishable with a fine of not less than fifty thousand rupees, which may extend to five lakh rupees.

  1. ANo consequence arises, as the use of LLP in the name is only a trade practice
  2. BEach person carrying on the business is punishable with a fine of not less than fifty thousand rupees, which may extend to five lakh rupeesCorrect
  3. COnly the managing partner is punishable with a fine up to fifty thousand rupees
  4. DThe persons are punishable with a fine of not less than five lakh rupees, extendable to ten lakh rupees

Explanation

Section 20 provides that persons who carry on business under a name ending in 'Limited Liability Partnership' or 'LLP' or a contraction or imitation, without being duly incorporated as an LLP, are each punishable with a fine of at least Rs 50,000 and up to Rs 5 lakh. Option C wrongly limits liability to one person and caps the fine.

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