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

Nila LLP has three partners, Nila, Omar and Pooja. Nila's contribution of Rs 10 lakh is recorded in the LLP agreement. The agreement is silent on profit sharing and on remuneration to partners. Under the LLP Act, 2008 and its First Schedule (default provisions), which statement is correct?

Where the LLP agreement is silent, the First Schedule applies: all partners share profits and losses equally, and no partner is entitled to remuneration for taking part in the business of the LLP. Sharing by contribution or salaries needs an express agreement.

  1. AProfits are shared in proportion to contributions, and each partner gets a salary
  2. BProfits are shared equally, and no partner is entitled to remunerationCorrect
  3. CProfits are shared equally, and each partner is entitled to remuneration decided by designated partners
  4. DProfits go only to the designated partners

Explanation

Where the agreement is silent, the mutual rights and duties are governed by the First Schedule. All partners are entitled to share equally in capital, profits and losses, and no partner is entitled to remuneration for taking part in the business. Contribution-based sharing is therefore wrong.

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