CS Puja Shree Agarawal Limited Liability Partnership Act, 2008

The Limited Liability Partnership Act, 2008

Introduction
The Parliament passed the Limited Liability Partnership Bill on 12th December, 2008 and the President
of India has assented the Bill on 7th January, 2009 and called as the Limited Liability Partnership Act,
2008, and many of its sections got enforced from 31st March 2009.

This Act have been enacted to make provisions for the formation and regulation of Limited Liability
Partnerships and for matters connected there with or incidental thereto.

The LLP Act, 2008 has 81 sections and 4 schedules.

The First Schedule deals with mutual rights and duties of partners, as well limited liability partnership
and its partners where there is absence of formal agreement with respect tothem.

The Second Schedule deals with conversion of a firm into LLP.

The Third Schedule deals with conversion of a private company into LLP.

The Fourth Schedule deals with conversion of unlisted public company into LLP.

The Ministry of Corporate Affairs (MCA) and the Registrar of Companies (ROC) are entrusted withthe
task of administrating theLLP Act, 2008. The Central Government hasthe authoritytoframethe Rules
with regard to the LLP Act, 2008, and can amend them by notifications in the Official Gazette, from
time totime.

It is also to be noted that The Indian Partnership Act, 1932 is not applicable to LLPs.

Need of new form of Limited Liability Partnership

The lawmakers envisage (to imagine) the needs for bringing out the new legislation for creation of the
Limited Liability Partnership tomeet withthe contemporary growth of the Indian economy. A need has
been felt for a new corporate form that would provide an alternative to the traditional partnership
with unlimited personal liability on the one hand and the statute-based governance structure of the
limited liability company on the other hand, in order to enable professional expertise and
entrepreneurial initiative to combine, organize and operate in flexible, innovative and efficient manner.

The Limited Liability Partnership (LLP) is viewed as an alternative corporate business vehicle. It
provides the benefits of limited liability but allows its members the flexibility of organizing their
internal structure as a partnership based on a mutually arrived agreement. The LLP form enables
entrepreneurs, professionals and enterprises providing services of any kind or engaged in scientific
and technical disciplines, to form commercially efficient vehicles suited to their requirements. Owing
to flexibility in its structure and operation, the LLP is a suitable vehicle for small enterprises and for

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investment by venture capital.

Limited Liability Partnership – Meaning & Concept

A LLP is a new form of legal business entity with limited liability. It is an alternative corporate business
vehicle that not only gives the benefits of limited liability at low compliance cost but allows its partners
the flexibility of organizing their internal structure as a traditional partnership. The LLP is a separate legal
entity and, while the LLP itself will be liable for the full extent of its assets, the liability of the partners
will be limited.

LLP is an alternative corporate business form that gives the benefits of limited liability of a company and
the flexibility of a partnership.

Since LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is
called a hybrid between a company and a partnership.

Important Definitions
Section Topic Definition
2 (d) Body Corporate It means a company as defined in section 3 of the Companies Act,
1956 (now Companies Act, 2013) and includes—
(i) a LLP registered under this Act;
(ii) a LLP incorporated outside India; and
(iii) a company incorporated outside India, but does not include—
 a corporation sole;
 a co-operative society registered under any law for the time
being in force; and
 any other body corporate (not being a company as defined in
section 3 of the Companies Act, 1956 or a limited liability
partnership as defined in this Act), which the Central
Government may, by notification in the Official Gazette,
specify in this behalf.
2 (e) Business “Business” includes every trade, profession, service and occupation.
2 (j) Designated “Designated partner” means any partner designated as such pursuant
Partner to section 7.
2 (k) Entity ‘’Entity” means any body corporate and includes, for the purposes of
sections 18, 46, 47, 48, 49, 50, 52 and 53, a firm setup under the Indian
Partnership Act, 1932.
2 (l) Financial Year “Financial year”,inrelationto a LLP,meansthe periodfrom the 1st day of
April of a year to the 31st day of March of the following year.
However, in the case of a LLP incorporated after the 30th day of
September of a year, the financial year may end on the 31st day of
March of the year next following that year.
2 (m) Foreign LLP It means a LLP formed, incorporated or registered outside India
which establishes a place of business within India.
2 (n) Limited Liability Limited Liability Partnership means a partnership formed and

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Partnership registered under thisAct.

2 (o) Limited Liability It means any written agreement between the partners of the LLP or
Partnership between the LLP and its partners which determines the mutual rights
agreement and duties of the partners and their rights and duties in relation to
that LLP.
2 (q) Partner Partner, in relation to a LLP, means any person who becomes a
partner in the LLP in accordance with the LLP agreement.
4 Non – applicability Save as otherwise provided, the provisions of the Indian Partnership
of the Indian Act, 1932 shall not apply to a LLP.
Partnership Act,
1932
5 Partners Any individuals or body corporate may be a partner in a LLP.
However, an individual shall not be capable of becoming a partner of
a LLP, if –
a) he has been found to be unsound mind by a Court of competent
jurisdiction and the finding is in force
b) he is an undischarged insolvent or
c) he has applied to be adjudicated as an insolvent and his
application is pending.
6 Minimum number (i) Every LLP shall have at least two partners.
of partners (ii) If at any time the number of partners of a LLP is reduced below two
and the LLP carries on business for more than six months while the
number is so reduced, the person, who is the only partner of the LLP
during the time that it so carries on business after those six months
and has the knowledge of the fact that it is carrying on business
with him alone, shall be liable personally for the obligations of the
LLP incurred during that period.
7 Designated (i) Every LLP shall have at least two designated partners who are
partners individuals and at least one of them shall be a resident inIndia.
(ii) If in LLP, all the partners are bodies corporate or in which one or
more partners are individuals and bodies corporate, at least two
individualswhoarepartnersofsuchLLPornomineesofsuchbodies
corporate shall act as designatedpartners.
(iii) Resident in India: Forthe purposes of this section, the term“resident
in India” means a person who has stayed in India for a period of not
less than 182 days during the immediately preceding one year.

Characteristic / Salient Features of LLP

1) LLP is a body corporate: Section 3 of LLP Act provides that a LLP is a body corporate formed and
incorporated under this Act and is a legal entity separate from that of its partners.
2) Perpetual Succession: The LLP can continue its existence irrespective ofchanges inpartners. Death,
insanity, retirement or insolvency of partners has no impact on the existence of LLP.It is capable of
entering into contracts and holding property in its own name.
3) Separate Legal Entity: The LLP is a separate legal entity, is liable to the full extent of its assets
but liability of the partners is limited to their agreed contribution in the LLP. In other words,

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creditors of LLP shall be the creditors of LLP alone.

4) Mutual Agency: Further, no partner is liable on account of the independent or un-authorized
actions of other partners, thus individual partners are shielded from joint liability created by
another partner’s wrongful business decisions or misconduct. In other words, all partners will be
the agents of the LLP alone. No one partner can bind the other partner by his acts.
5) LLP Agreement: Mutual rights and duties of the partners within a LLP are governed by an
agreement between the partners. The LLP Act, 2008 provides flexibility to partner to devise the
agreement as per their choice. In the absence of any such agreement, the mutual rights and
duties shall be governed by the provisions of the LLP Act, 2008.
6) Artificial Legal Person: A LLP is an artificial legal person because it is created by a legal process
and is clothed with all rights of an individual. It can do everything which any natural person can
do, except of course that, it cannot be sent to jail, cannot take an oath, cannot marry or get divorce
nor can it practice alearned profession like CA or Medicine. A LLP is invisible, intangible, immortal
(it can be dissolved by law alone) but not fictitious because it really exists.
7) Common Seal: A LLP being an artificial person can act through its partners and designated
partners. LLP may have a common seal, if it decides to have one [Section 14(c)]. Thus, it is not
mandatory for a LLP to have a common seal. It shall remain under the custody of some
responsible official and it shall be affixed in the presence of at least 2 designated partners of the
LLP.
8) Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the agent of
the LLP, but not of other partners (Section. 26). The liability of the partners will be limited to their
agreed contribution in the LLP.
9) Management of Business: The partners in the LLP are entitled tomanage the business of LLP. But
only the designated partners are responsible for legal compliances.
10) Minimum and Maximum number of Partners: Every LLP shall have least two partners and shall
also have at least 2 individuals as designated partners, of whom at least one shall be resident in
India. There is no maximum limit on the partners in LLP.
11) Business for Profit Only: The essential requirement for forming LLP is carrying on a lawful
business with a view to earn profit. Thus LLP cannot be formed for charitable or non-economic
purpose.
12) Investigation: The Central Government shall have powers to investigate the affairs of an LLP by
appointment of competence authority for the purpose.
13) Compromise or Arrangement: Any compromise or arrangement including merger and
amalgamation of LLPs shall be in accordance with the provisions of the LLP Act, 2008.
14) Conversion into LLP: A firm, private company or an unlisted public company would be allowed
to be converted into LLP in accordance with the provisions of LLP Act, 2008.
15) E-Filling of Documents: Every form or application of document required to be filed or delivered
under the act and rules made thereunder, shall be filed in computer readable electronic form on its
website www.mca.gov.in and authenticated by a partner or designated partner of LLP by the use of
electronic or digital signature.
16) Foreign LLPs: Section 2(1)(m) defines foreign limited liability partnership “as a limited liability
partnership formed, incorporated, or registered outside India which established a place of business

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within India”. Foreign LLP can become a partner in an Indian LLP.

Advantages of LLP
LLP form is a form of business model which:

 Is organized and operates on the basis of agreement.

 Provides flexibility without imposing detailed legal and procedural requirements.
 Easy to form.
 All partners enjoy limited liability.
 Flexible Capital Structure.
 Easy to dissolve.

Incorporation of LLP
Incorporation documents –Sec. 11
1) For a LLP to be incorporated:
a) two or more persons associated for carrying on a lawful business with a view to profit shall
subscribe their names to an incorporation document;
b) the incorporation document shall be filed in such manner and with such fees, as may be
prescribed with the Registrar of the State in which the registered office of the LLP is to be
situated; and
c) Statement to befiled:
 There shall be filed along with the incorporation document, a statement in the prescribed
form,
 made by either an advocate, or a Company Secretary or a Chartered Accountant or a
Cost Accountant, who is engaged in the formation of the LLP and
 by any one who subscribed his name to the incorporation document,
 that all the requirements of this act and the rules made thereunder have been complied
with,
 in respect of incorporation and matters precedent and incidental thereto.
2) The incorporation document shall –
a) Be in a form as may be prescribed;
b) State the name of the LLP;
c) State the proposed business of the LLP;
d) State the address of the registered office of the LLP;
e) State the name and address of each of the persons who are to be partners of the LLP on

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incorporation;
f) state the name and address of the persons who are to be designated partners of the LLP
on incorporation;
g) contain such other information concerning the proposed LLP as may be prescribed.
3) If a person makes a statement as discussed above whichhe—
a) knows to be false; or
b) does not believe to be true, shall be punishable
 With imprisonment for a term which may extend to 2 years and
 with fine which shall not be less than INR 10,000 but which may extend to INR 5 Lakhs.

Incorporation by registration – Sec. 12

1) When the requirements imposed by clauses (b) and (c) of sub-section (1) of section 11 have
been complied with, the Registrar shall retain the incorporation document and, unless the
requirement imposed by clause (a) of that sub-section has not been complied with, he shall,
within a period of 14 days—
a) register the incorporation document; and
b) give a certificate that the LLP is incorporated by the name specified therein.
2) The Registrar may accept the statement delivered under clause (c) of sub-section (1) of section 11
as sufficient evidence that the requirement imposed by clause (a) of that sub-section has been
complied with.
3) The certificate issued under clause (b) of sub-section (1) shall be signed by the Registrar and
authenticated by his official seal.
4) The certificate shall be conclusive evidence that the LLP is incorporated by the name specified
therein.

Registered office of LLP and change therein – Sec. 13

1) Every LLP shall have a registered office to which all communications and notices may be addressed
and where they shall be received.
2) A document may be served on a LLP or a partner or designated partner thereof by sending it by
post under a certificate of posting or by registered post or by any other manner, as may be
prescribed, at the registered office and any other address specifically declared by the LLP for the
purpose in such form and manner as may be prescribed.
3) A LLP may change the place of its registered office and file the notice of such change with the
Registrar in such form and manner and subject to such conditions as may be prescribed and any
such change shall take effect only upon such filing.
4) If the LLP contravenes any provisions of this section, the LLP and its every partner shall be
punishable withfine which shall not be less than INR2,000 but which may extend to INR 25,000.

Effect of registration – Sec. 14

On registration, a LLP shall, by its name, be capable of –

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 Suing and beingsued

 Acquiring, owning, holding and developing or disposing of property, whether movable or
immovable, tangible orintangible
 Having a common seal, if it decides to have one, and
 Doing and suffering such other acts and things as bodies corporate may lawfully do and suffer.

Name – Sec. 15
1) Every limited liability partnership shall have either the words “limited liability partnership” or the
acronym “LLP” as the last words of its name.
2) No LLP shall be registered by a name which, in the opinion of the Central Government is—
a) undesirable; or
b) identical or too nearly resembles to that of any other partnership firm or LLP or body corporate
or a registered trade mark, or a trade mark which is the subject matter of an application for
registration of any other person under theTrade Marks Act, 1999.

Reservation of Name – Sec. 16

1) Apersonmayapplyinsuchformandmannerandaccompaniedbysuchfeeasmaybeprescribedto
the Registrar for the reservation of a name set out in the application as—
a) the name of a proposed LLP; or
b) the name to which a LLP proposes to change its name.
2) Upon receipt of an application under sub-section (1) and on payment of the prescribed fee, the
Registrar may, if he is satisfied, subject to the rules prescribed by the Central Government in the
matter, that the name to be reserved is not one which may be rejected on any ground referred to
in sub-section (2) of section 15, reserve the name for a period of 3 months from the date of
intimation by the Registrar.

Change of name of LLP – Sec. 17

1) Notwithstanding anything contained in sections 15 and 16, where the Central Government is
satisfied that a LLP has been registered (whether through inadvertence or otherwise and
whether originally or by a change of name) under a name which —
a) is a name referred to in sub-section (2) of section 15; or
b) is identical with or too nearly resembles the name of any other LLP or body corporate or other
name as to be likely to be mistaken forit,
the Central Government may direct such LLP to change its name, and the LLP shall comply with
the said direction within 3 months after the date of the direction or such longer period as the
Central Government may allow.

2)
(i) Any LLP which fails to comply with a direction given under sub-section (1) shall be punishable
with fine which shall not be less than INR 10,000 but which may extend to INR 5 Lakhs.

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(ii) The designated partner of such LLP shall be punishable with fine which shall not be less
than INR 10,000 but which may extend to INR 1 Lakh.

Steps to incorporate LLP

Name Reservation  The first step to incorporate Limited Liability Partnership (LLP) is reservation of
name of LLP.
 Applicant has to file e-Form 1, for ascertaining availability and reservation of the
name of a LLP business.
Incorporate LLP  After reserving a name, user has tofilee- Form 2for incorporating a new Limited
Liability Partnership (LLP).
 e-Form 2 contains the details of LLP proposed to be incorporated, partners’/
designated partners’ details and consent of the partners/designated partners to
act as partners/ designated partners.
LLP Agreement  Execution of LLP Agreement is mandatory as per Section 23 of the Act.
 LLP Agreement is required to be filed with the registrar in e-Form 3 within
30 days of incorporation of LLP.

Partners and their relations

Eligibility to be partners – Sec. 22
On the incorporation of a LLP, the persons who subscribed their names to the incorporation
document shall be its partners and any other person may become a partner of the LLP by and in
accordance with the LLP agreement.

Relationship of partners – Sec. 23

1) Save as otherwise provided by this Act, the mutual rights and duties of the partners of a LLP, and
the mutual rights and duties of a LLP and its partners, shall be governed by the LLP agreement
between the partners, or between the LLP and its partners.
2) The LLP agreement and any changes, if any, made therein shall be filed with the Registrar in such
form, manner and accompanied by such fees as may be prescribed.
3) An agreement in writing made before the incorporation of a LLP between the persons who
subscribe their names to the incorporation document may impose obligations on the LLP,
provided such agreement is ratified by all the partners after the incorporation of the LLP.
4) In the absence of agreement as to any matter, the mutual rights and duties of the partners and
the mutual rights and duties of the LLP and the partners shall be determined by the provisions
relating to that matter as are set-out in the First Schedule.

Cessation of partnership interest – Sec. 24

1) A person may cease to be a partner of a LLP in accordance with an agreement with the other
partners or, in the absence of agreement with the other partners as to cessation of being a
partner, by giving a notice in writing of not less than 30 days to the other partners of his intention
to resign as partner.
2) A person shall cease to be a partner of a LLP—

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a) on his death or dissolution of the LLP; or

b) if he is declared to be of unsound mind by a competent court;or
c) if he has applied to be adjudged as an insolvent or declared as aninsolvent.
3) Where a person has ceased to be a partner of a LLP (hereinafter referred to as “former partner”),
the former partner is to be regarded (in relation to any person dealing with the LLP) as still being a
partner of the LLP unless—
a) the person has notice that the former partner has ceased to be a partner of the LLP;or
b) notice that the former partner has ceased to be a partner of the LLP has been delivered to the
Registrar.
4) The cessation of a partner from the LLP does not by itself discharge the partner from any
obligation to the LLP or to the other partners or to any other person which he incurred while
being apartner.
5) Where a partner of a LLP ceases to be a partner, unless otherwise provided in the LLP agreement,
the former partner or a person entitled to his share in consequence of the death or insolvency of
the former partner, shall be entitled to receive from the LLP—
a) anamountequalto the capital contribution ofthe former partner actuallymadetothe LLP; and
b) his right to share in the accumulated profits of the LLP, after the deduction of accumulated
losses of the LLP,determined as at the date the former partner ceased to be a partner.
6) A former partner or aperson entitled tohissharein consequence of the death or insolvency of
the former partner shall not have any right to interfere in the management of the LLP.

Registration of changes in partners – Sec. 25

1) Every partner shall inform the LLP of any change in his name or address within a period of 15
days of such change.
2) A LLP shall—
a) where a person becomes or ceases to be a partner, file a notice with the Registrar within 30
days from the date he becomes or ceases to be a partner;and
b) where there is any change in the name or address of a partner, file a notice with the Registrar
within 30 days of such change.
3) A notice filed with the Registrar under sub-section (2)—
a) shall be in such form and accompanied by such fees as may be prescribed;
b) shall be signed by the designated partner of the LLP and authenticated in a manner as may
be prescribed; and
c) if it relates to an incoming partner, shall contain a statement by such partner that he
consents to becoming a partner, signed by him and authenticated in the manner as may be
prescribed.
4) If the LLP contravenes the provisions of sub-section (2), the LLP and every designated partner of the
LLPshallbepunishablewithfinewhichshallnot belessthanINR2,000butwhichmayextendtoINR
25,000.

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5) If any partner contravenes the provisions of sub-section (1), such partner shall be punishable with
fine which shall not be less than INR 2,000 but which may extend to INR 25,000.
6) Any person who ceases to be a partner of a LLP may himself file with the Registrar the notice
referred to in sub-section (3) if he has reasonable cause to believe that the LLP may not file the
notice withthe Registrar and in case of any such notice filed by a partner, the Registrar shall obtain
a confirmation to this effect from the LLP unless the LLP has also filed suchnotice.
However, where no confirmation is given by the LLP within 15 days, the registrar shall register the
notice made by a person ceasing to be a partner under this section.

Extent and Limitation of Liability of LLP and Partner

Partner as agent – Sec. 26
Every partner of a LLP is, for the purpose of the business of the LLP, the agent of the LLP, but not of
other partners.

Extent of liability of LLP – Sec. 27

1) A LLP is not bound by anything done by a partner in dealing with a person if—
a) the partner in fact has no authority to act for the LLP in doing a particular act; and
b) the person knows that he has no authority or does not know or believe him to be a partner of
the LLP.
2) The LLP is liable if a partner of a LLP is liable to any person as aresult of a wrongful act or omission
on his part in the course of the business of the LLP or with itsauthority.
3) An obligation of the LLP whether arising in contract or otherwise, shall be solely the obligation of
the LLP.
4) The liabilities of the LLP shall be met out of the property of the LLP.

Extent of liability of partner – Sec. 28

1) A partner is not personally liable, directly or indirectly for an obligation referred to in sub-section
(3) of section 27 solely by reason of being a partner of the LLP.
2) The provisions of sub-section (3) of section 27 and sub-section (1) of this section shall not affect
the personal liability of a partner for his own wrongful act or omission, but a partner shall not be
personally liable for the wrongful act or omission of any other partner of the LLP.

Holding out – Sec. 29

1) Any person, who by words spoken or written or by conduct, represents himself, or knowingly
permits himself to be represented to be a partner in a LLP is liable to any person who has on the
faith of any such representation given credit to the LLP, whether the person representing
himself or represented to be a partner does or does not know that the representation has reached
the person so giving credit.
However, where any credit is received by the LLP as aresult of such representation, the LLP shall,
without prejudice to the liability of the person so representing himself or represented to be a

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partner, be liable to the extent of credit received by it or any financial benefit derived thereon.

2) Where after a partner’s death the business is continued in the same LLP name, the continued use of
that name or of the deceased partner’s name as a part thereof shall not of itself make his legal
representative or his estate liable for any act of the LLP done after his death.

Unlimited liability in case of fraud – Sec. 30

1) In case offraud:
 In the event of an act carried out by a LLP, or any of its partners,
 with intent to defraud creditors of the LLP or any other person, or for any fraudulent purpose,
 the liability of the LLP and partners who acted with intent to defraud creditors or for any
fraudulent purpose
 shall be unlimited for all or any of the debts or other liabilities of the LLP.
However, in case any such act is carried out by a partner, the LLP is liable to the same extent as
the partner unless it is established by the LLP that such act was without the knowledge or the
authority of the LLP.

2) Where any business is carried on with such intent or for such purpose as mentioned in sub-section
(1), every person who was knowingly a party to the carrying on of the business in the manner
aforesaid shall be punishable with
 Imprisonment for a term which may extend to 2 years and
 with fine which shall not be less than INR 50,000 but which may extend to INR 5 Lakhs.
3) Where a LLP or any partner or designated partner or employee of such LLP has conducted the
affairs of the LLP in a fraudulent manner, then without prejudice to any criminal proceedings
which may arise under any law for the time being in force, the LLP and any such partner or
designated partner or employee shall be liable to pay compensation to any person who has
suffered any loss or damage by reason of such conduct.
However, such LLP shall not be liable if any such partner or designated partner or employee has
acted fraudulently without knowledge of the LLP.

Whistle blowing – Sec.31

1) The Court or Tribunal mayreduce or waive any penalty leviable against any partner or employee of
a LLP, if it is satisfied that—
 Such partner or employee of a LLP has provided useful information during investigation of such
LLP; or
 when any information given by any partner or employee (whether or not during investigation)
leads to LLP or any partner or employee of such LLP being convicted under this Act or any other
Act.
2) No partner or employee of any LLP may be discharged, demoted, suspended, threatened,
harassed or in any other manner discriminated against the terms and conditions of his LLP or
employment merely because of his providing information or causing information to be provided
pursuant to sub-section (1).

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Financial Disclosures
Maintenance of books of account, other records and audit, etc. – Sec. 34
1) Proper Books ofaccount:
 The LLP shall maintain such proper books of account as may be prescribed
 relating to its affairs for each year of itsexistence
 on cash basis or accrual basis and
 according to double entry system of accounting and
 shall maintain the same at its registered office
 for such period as may be prescribed.
2) Statement of Account and Solvency:
 Every LLP shall,
 within a period of 6 months from the end of each financialyear,
 prepare a Statement of Account and Solvency
 for the said financial year as at the last day of the said financial year
 in such form as may be prescribed, and
 such statement shall be signed by the designated partners of the LLP.
3) Every LLP shall file within the prescribed time, the Statement of Account and Solvency prepared
pursuant to sub-section (2) with the Registrar every year in such form and manner and
accompanied by such fees as may beprescribed.
4) The accounts of LLP shall be audited in accordance with such rules as may be prescribed. However,
the Central Government may, by notification in the Official Gazette, exempt any class or classes of
LLP from the requirements of this sub-section.
5) Any LLP which fails to comply with the provisions of this section shall be punishable
 With fine which shall not be less than INR 25,000
 but which may extend to INR 5 Lakhs
Every designated partner of such LLP shall be punishable

 With fine which shall not be less than INR 10,000

 but which may extend to INR 1 Lakh.

Annual return – Sec. 35

1) Every LLP shall file an annual return duly authenticated with the Registrar within 60 days of
closure of its financial year in such form and manner and accompanied by such fee as may be
prescribed.
2) Any LLP which fails to comply with the provisions of this section shall be punishable with fine
which shall not be less than INR 25,000 but which may extend to INR 5 Lakhs.

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3) If the LLP contravenes the provisions of this section, the designated partner of such LLP shall be
punishable withfine which shall not be less than INR 10,000 but which may extend to INR 1 Lakh.

Conversion into LLP

1) Conversion from firm into LLP (Section 55): A firm may convert into a LLP in accordance with the
provisions of this Chapter and the Second Schedule.
2) Conversion from private company into LLP (Section 56): A private company may convert into a
LLP in accordance with the provisions of this Chapter and the Third Schedule.
3) Conversion from unlisted public company into LLP (Section 57): An unlisted public company
may convert into a LLP in accordance with the provisions of this Chapter and the Fourth
Schedule.
4) Registration and effect of conversion (Section 58):
Registration:

(i) The Registrar, on satisfying that a firm, private company or an unlisted public company, as the
case may be, has complied with the provisions of the various Schedules, provisions of this Act and
the rules madethereunder, register the documents issue a certificate of registration in such form
as the Registrar may determine stating that the LLP is, on and from the date specified in the
certificate, registered under this Act.
(ii) The LLP shall, within 15 days of the date of registration, inform the concerned Registrar of Firms or
Registrar of Companies, as the case may be, withwhich it was registered under the provisions of
the Indian Partnership Act, 1932 or the Companies Act, 1956 (Now Companies Act, 2013) as the case
may be, about the conversion and of the particulars of the LLP in such form and manner asmay
be prescribed.
(iii) Upon such conversion, the partners of the firm, the shareholders of private company or unlisted
public company, as the case may be, the LLP to which such firm or such company has converted, and
the partners of the LLP shall be bound by the provisions of the various Schedules, as the case may
be, applicable to them.
(iv) Upon such conversion, on and from the date of certificate of registration, the effects of the
conversion shall be such as specified in the various schedules, as the case maybe.
Effect of Registration: Notwithstanding anything contained in any other law for the time being in
force, on and from the date of registration specified in the certificate of registration issued under
the various Schedule, as the case may be,—

a) There shall be a LLP by the name specified in the certificate of registration registered under this
Act;
b) alltangible (movable or immovable) andintangible propertyvestedinthefirm or thecompany, as
the case may be, all assets, interests, rights, privileges, liabilities, obligations relating to the firm or the
company, as the case may be, and the whole of the undertaking of the firm or the company,as
the case may be, shall be transferred to and shall vest in the limited liability partnership
without further assurance, act or deed; and
c) the firm or the company, as the case may be, shall be deemed to be dissolved and removed from

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the records of the Registrar of Firms or Registrar of Companies, as the case may be.

Foreign LLPs –Sec. 59

The Central Government may make rules for provisions in relation to establishment of place of
business by foreign LLP within India and carrying on their business therein by applying or
incorporating, with such modifications, as appear appropriate, the provisions of the Companies Act,
2013 or such regulatory mechanism with such composition as may be prescribed.

Winding up anddissolution
Winding up and dissolution – Sec. 63
The winding up of a LLP may be either voluntary or by the Tribunal and LLP, so wound up may be
dissolved.

Circumstances in which LLP may be wound up by Tribunal –Sec.63

A LLP may be wound up by the Tribunal:

a) If the LLP decides that LLP be wound up by the Tribunal;

b) if, for a period of more than six months, the number of partners of the LLP is reduced below two;
c) if the LLP is unable to pay its debts;
d) if the LLP has acted against the interests of the sovereignty and integrity of India, the security of
the State or public order;
e) if the LLP has made a default in filing with the Registrar the Statement of Account and Solvency
or annual return for any five consecutive financial years; or
f) if the Tribunal is of the opinion that it is just and equitable that the LLP be wound up.

Rules for winding up and dissolution – Sec. 65

The Central Government may make rules for the provisions in relation to winding up and
dissolution of LLP.

Miscellaneous
Business transactions of partner with LLP – Sec. 66
A partner may lend money to and transact other business with the LLP and has the same rights and
obligations with respect to the loan or other transactions as a person who is not a partner.

Application of the provisions of the Companies Act – Sec. 67

1) The Central Government may, by notification in the Official Gazette, direct that any of the
provisions of the Companies Act, 2013 specified in the notification—

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 Shall apply to any LLP; or

 shall apply to any LLP with such exception, modification and adaptation, as may be specified,
in the notification.
2) A copy of every notification proposed to be issued under sub-section (1)
 Shall be laid in draft before each House of Parliament, while it is in session,
 for a total period of 30 days which may be comprised in one session or in two or more
successive sessions, and
 if, before the expiry of the session immediately following the session or the successive sessions
aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree
in making any modification in the notification,
 the notification shall not be issued or, as the case maybe,
 shall be issued only in such modified form as may be agreed upon by both the Houses.

Electronic filing of documents – Sec. 68

1) Any document required to be filed, recorded or registered under this Act may be filed, recorded or
registered in such manner and subject to such conditions as may be prescribed.
2) A copy of or an extract from any document electronically filed with or submitted to the Registrar
which is supplied or issued by the Registrar and certified through affixing digital signature as per the
Information Technology Act, 2000 to be a true copy of or extract from such document shall, in any
proceedings, be admissible in evidence as of equal validity with the original document.
3) Any information supplied by the Registrar that is certified by the Registrar through affixing
digital signature to be a true extract from any document filed with or submitted to the Registrar
shall, in any proceedings, be admissible in evidence and be presumed, unless evidence to the
contrary is adduced, to be a true extract from such document.

Payment of additional fee – Sec. 69

Any document or return required to be filed or registered under this Act with the Registrar, if, is not filed
or registered in time provided therein, may be filed or registered after that time upto a period of 300
days from the date within which it should have been filed, on payment of additional fee of INR 100 for
every day of such delay in addition to any fee as is payable for filing of such document or return.

However, such document or return may, without prejudice to any other action or liability under this Act,
alsobe filed after such period of 300days on payment of fee andadditional fee specified in thissection.

LLP v/s Partnership Firm

The points of distinction between a limited liability partnership and partnership firm are tabulated
as follows:

Basis LLP Partnership firm

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CS Puja Shree Agarawal Limited Liability Partnership Act, 2008

Regulating Act The Limited Liability Partnership The Indian Partnership Act, 1932.
Act, 2008.
Body corporate It is a body corporate. It is not a body corporate.

Separate legal entityIt is a legal entity separate from its It is a group of persons with no
members. separate legal entity.
Creation It is created by a legal process It is created by an agreement
called registration under the LLP between the partners.
Act, 2008.
Registration Registration is mandatory. LLP Registration is voluntary. Only the
can sue and be sued in its own registered partnership firm can
name. sue the third parties.
Perpetual succession The death, insanity, retirement or The death, insanity retirementor
insolvency of the partner(s) does insolvency of the partner(s) may
not affect its existence of LLP. affect its existence. It has no
Members may join or leave but its perpetual succession.
existence continues forever.
Name Name of the LLP to contain the No guidelines. The partners can
word limited liability partners haveanynameaspertheirchoice.
(LLP) as suffix.
Liability Liability of each partner limited Liability of each partner is
to the extent to agreed unlimited. It can be extended upto
contribution except in case of the personal assets of the
willful fraud. partners.
Mutual agency Each partner can bind the LLP by Each partner can bind the firm as
his own acts but not the other well as other partners by his own
partners. acts.
Designated partners At least two designated partners There is no provision for such
and atleast one of them shall be partners under the Indian
resident in India. partnership Act, 1932.
Common seal It may have its common seal as its There is no such concept in
official signatures. partnership
Legal compliances Only designated partners are All partners are responsible for all
responsible for all the compliances the compliances and penalties
and penalties under this Act. under the Act.
Annual filing of LLP is required to file: (i) Annual Partnership firm is not required to
documents statement of accounts (ii) file any annual document with the
Statement of solvency (iii) Annual registrar of _rms.
return with the registration of LLP
every year.
Foreign partnership Foreign nationals can become a Foreign nationals cannot become
partner in a LLP. a partner in a partnership firm.
Minor as partner Minor cannot be admitted to the Minor can be admitted to the
benefits of LLP. benefits of the partnership with
the prior

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LLP v/s Limited Liability Company (LLC)

Basis LLP LLC
Regulating Act The LLP Act, 2008. The Companies Act, 2013.
Members/Partners The persons who contribute to The persons who invest the money
LLP are known as partners of the in the shares are known as
LLP. members of the company.
Internal governance The internal governance The internal governance
structure structure of a LLP is governed by structure of a company is
agreement between the regulated by statute (i.e.,
partners. Companies Act,2013).
Name Name of the LLP to contain the Name of the public company to
word “Limited Liability contain the word “limited” and
partnership” or “LLP” as suffix. Private company to contain the
word “Private limited”as suffix.
Number of members/ Minimum – 2 members Private company:
partners
Maximum – No such limit on the Minimum – 2 members
members in the Act. The members
Maximum - 200
of the LLP can be individuals/or
body corporate through the members
nominees.
Public company:
Minimum – 7 members
Maximum – No such limit on the
members.
Members can be organizations,
trusts, another business form or
individuals.
Liability of members/ Liability of a partners is limited to Liability of a member is limited to
partners the extent of agreed contribution the amount unpaid on the shares
except in case of willful fraud. held by them.
Management The business of the company The affairs of the company are
managed by the partners managed by board of directors
including the designated elected by the shareholders.
partners authorized in the
agreement.
Minimum number of Minimum 2 designated partners. Private Co. – 2 directors
directors/designated
PublicCo. –3directors
partners

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