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

Rohit, Seema and Tanuja want to carry on a trading business in Kochi through an LLP. Which of the following correctly states how the LLP Act, 2008 views the purpose of an LLP?

An LLP must be formed to carry on a lawful business with a view to profit. It is not limited to professional services, and it cannot be formed purely for charitable or non-profit purposes, since the profit motive is part of the statutory concept.

  1. AAn LLP may be formed for carrying on a lawful business with a view to profitCorrect
  2. BAn LLP may be formed for any charitable purpose without a profit motive
  3. CAn LLP may be formed only for professional services such as accountancy
  4. DAn LLP may be formed only for a business which is not for profit

Explanation

The Act defines an LLP as a body formed for carrying on a lawful business with a view to profit. It is not restricted to professions, so the option limiting it to professional services is wrong. A non-profit or charitable purpose does not fit the definition.

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