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CS Executive · Setting Up of Business, Industrial and Labour Laws · Selection of Business Organization

Three promoters in Chennai start a trading business as an LLP. One partner, Ravi, also lends Rs 5 lakh to the LLP. A fellow partner argues Ravi has no special rights on this loan because he is a partner. Under the LLP Act, 2008, what is the correct position?

Ravi may lend to the LLP, and in respect of that loan he has the same rights and obligations as an outsider who is not a partner. The LLP Act, 2008 expressly permits partners to transact business with the LLP, so no prohibition or subordination applies.

  1. ARavi can lend, and has the same rights and obligations on the loan as a person who is not a partnerCorrect
  2. BA partner is prohibited from lending money to the LLP
  3. CRavi can lend but only with a subordinated claim after other partners' capital
  4. DRavi can lend only if all partners are designated partners

Explanation

Section 66 of the LLP Act, 2008 allows a partner to lend money to and transact other business with the LLP, with the same rights and obligations on the loan as a non-partner. So no prohibition or subordination applies. The designated partner status is irrelevant.

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