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

Ravi, Sameer and Tara are partners in RST LLP. The LLP agreement does not specify how profits are shared or whether partners get remuneration. Ravi claims a salary for managing the daily affairs, and Sameer says profits should be shared in proportion to capital contribution. As per the LLP Act, 2008, in the absence of agreement, what is the position?

With no agreement on the matter, the default rules of the LLP Act apply: partners share profits and losses equally, and no partner is entitled to remuneration for taking part in the LLP's business. Capital contribution and managing role do not alter this default.

  1. AProfits are shared in proportion to capital, and managing partners get a fixed salary
  2. BAll partners share profits equally, and no partner is entitled to remunerationCorrect
  3. CProfits are shared equally, and the managing partner is entitled to a salary as decided by the Registrar
  4. DProfits are shared as the majority of partners decide each year, and Ravi gets remuneration

Explanation

Where the LLP agreement is silent, the First Schedule default rules apply: all partners are entitled to share equally in capital, profits and losses of the LLP, and no partner is entitled to remuneration for taking part in the business. Capital-based sharing is therefore wrong, and the Registrar has no role in fixing salary.

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