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CSEET · Fundamentals of Accounting · Partnership and LLP Accounts

Zenith Services LLP has four partners and its creditors' claims are Rs 12,00,000, while the LLP's own assets are Rs 8,00,000. Each partner has contributed Rs 1,00,000 and has no personal wrongful act involved. According to the LLP Act, 2008, how are the liabilities of the LLP to be met?

The liabilities are met only out of the property of the LLP. Under Section 27(3) and (4) of the LLP Act, 2008, an LLP's obligation is solely its own. Partners without personal wrongful acts are not personally liable for the Rs 4,00,000 shortfall.

  1. AOut of the property of the LLP, as its obligations are solely those of the LLPCorrect
  2. BEqually by the four partners from their personal property
  3. CBy the partners in proportion to capital, up to the unpaid Rs 4,00,000 only
  4. DBy the partner who first signed the contract

Explanation

Section 27(3) and (4) provide that an obligation of the LLP is solely its own obligation and its liabilities are met out of LLP property. The partners are not personally liable for the Rs 4,00,000 shortfall merely for being partners. The options that make partners pay confuse an LLP with an ordinary partnership.

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