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

Zenith LLP's LLP agreement is silent on the interest on partners' capital contributions and on profit sharing. Anita contributed ₹8 lakh and Bharat contributed ₹2 lakh. The LLP earns a profit of ₹5 lakh. Under the LLP Act, 2008 and the First Schedule default rules, how will the profit be shared?

Profit is shared equally at ₹2.5 lakh each. Where the LLP agreement is silent, the default rules in the First Schedule give partners equal shares in profits and losses regardless of capital contributed, and no interest on capital is payable.

  1. A₹4 lakh to Anita and ₹1 lakh to Bharat, in proportion to capital
  2. BEqually, ₹2.5 lakh each, as the partners share equally in profitsCorrect
  3. C₹4 lakh to Anita and ₹1 lakh to Bharat, after paying 6% interest on capital
  4. DProfit remains with the LLP until a partner majority resolves

Explanation

Under the default rules in the First Schedule, if the agreement is silent, all partners are entitled to share equally in capital, profits and losses. Interest on capital is not payable by default. Sharing in proportion to capital is a common mistake, taken from other contexts, and is wrong here.

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