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

Vihaan LLP's agreement is silent on profit sharing. The partners Anil (contributed ₹6,00,000), Bina (₹3,00,000) and Chetan (₹1,00,000) earn a profit of ₹3,00,000 for the year. What share does each receive under the LLP Act default provisions, ignoring any remuneration?

Each partner receives ₹1,00,000. Where the LLP agreement is silent, the default rule is that all partners share equally in profits, irrespective of the amount of capital each has contributed, so ₹3,00,000 is divided equally among the three.

  1. AAnil ₹1,80,000, Bina ₹90,000, Chetan ₹30,000, in proportion to capital
  2. B₹1,00,000 each, as profits are shared equallyCorrect
  3. CAnil ₹1,50,000, Bina ₹1,00,000, Chetan ₹50,000
  4. DAnil ₹2,00,000, Bina ₹75,000, Chetan ₹25,000

Explanation

In the absence of agreement, the First Schedule default rule is that all partners are entitled to share equally in capital and profits of the LLP. So ₹3,00,000 / 3 = ₹1,00,000 each. Sharing by capital is the mistaken approach in the first option.

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