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

Ramesh is a partner in Kiran Traders LLP. The LLP's partners are Ramesh, Sunita and Tarun. Kiran Traders LLP incurs a debt of ₹8 lakh from a bank and its assets are only ₹3 lakh. Ramesh did not act fraudulently and did not authorise any wrongful act. What is the position of Ramesh's liability?

Ramesh's liability is limited to his agreed contribution to the LLP. The LLP's debts are met from the LLP's own assets, and a partner is not personally liable for them unless he personally acted wrongfully or fraudulently, which did not happen here.

  1. ARamesh is personally liable for the whole shortfall of ₹5 lakh as in a general partnership
  2. BRamesh's liability is limited to his agreed contribution to the LLP, and his personal assets are not liable for the LLP's debtCorrect
  3. CRamesh is liable only if he is a designated partner
  4. DRamesh is liable jointly with the other partners for the entire ₹8 lakh

Explanation

An LLP's obligations are met out of the LLP's own assets. A partner's liability is limited to the agreed contribution, except for his own wrongful acts or fraud. Ramesh did neither, so his personal assets are safe. The first option wrongly applies ordinary partnership law.

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