BUSINESS LAWS QUESTION BANK CHAPTER:5

CA NIKESH AGRAWAL
BUSINESS LAWS QUESTION BANK CHAPTER: 5

Chapter: 5 – Limited Liability Partnership Act, 2008

Question Bank (Updated till Jan 2025 Attempt)

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BUSINESS LAWS QUESTION BANK CHAPTER: 5

09 - Dyana and Bharti, newly qualified chartered accountants, wish to form a Limited
Liability Partnership (LLP) to provide their professional services. They seek information
about the provisions of the Limited Liability Partnership Act, 2008, specifically regarding
the incorporation document. Additionally, they want to know whether the statement filed
along with the incorporation document serves as sufficient evidence that all legal
requirements for the incorporation of the LLP have been fulfilled. Explain these aspects to
them. 2)c)6m,Jan2025

Ans - Incorporation document (Section 11 of the Limited Liability Partnership Act, 2008):
The most important document needed for registration is the incorporation document.

(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 be filed:

• 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
incorporation;

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(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 which he—

(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 ` 10,000 but which may extend to ` 5 Lakhs.

Incorporation by registration (Section 12- Sufficient evidence): As per section 12, 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 the sub-section has been
complied with.

In view of above, the statement filed along with the incorporation document serves as sufficient
evidence that all legal requirements for the incorporation of the LLP have been fulfilled.

08 – Referring to the provisions of the Limited Liability Partnership Act, 2008, answer the
following:

(i) Under what circumstances a Limited Liability Partnership is compulsorily required to

change its name? Also, explain the compliance requirement following the change of name and
the consequences, if any, in case of default therein. (4m)

(ii) What do you mean by a Small Limited Liability Partnership? (2m)

2)c)6m,MDTP7,10, 2)c)6m,MTP1,Jan2025, 2)c)6m,Sept2024

Ans - (i) Change of name of LLP (Section 17 of Limited Liability Partnership Act, 2008):

(1) Notwithstanding anything contained in sections 15 and 16, if through inadvertence or

otherwise, a LLP, on its first registration or on its registration by a new body corporate, its
registered name, is registered by a name which is identical with or too nearly resembles to —

(a) that of any other LLP or a company; or

(b) a registered trade mark of a proprietor under the Trade Marks Act, 1999, as is likely to be
mistaken for it,

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then on an application of such LLP or proprietor referred to in clauses (a) and (b) respectively or
a company,

the Central Government may direct that such LLP to change its name or new name within a period
of 3 months from the date of issue of such direction.

(2) Where a LLP changes its name or obtains a new name under sub section (1), it shall within a
period of 15 days from the date of such change, give notice of the change to Registrar along
with the order of the Central Government, who shall carry out necessary changes in the
certificate of incorporation and within 30 days of such change in the certificate of
incorporation, such LLP shall change its name in the LLP agreement.

(3) If the LLP is in default in complying with any direction given under sub-section (1), the
Central Government shall allot a new name to the LLP in such manner as may be prescribed and
the Registrar shall enter the new name in the register of LLP in place of the old name and issue a
fresh certificate of incorporation with new name, which the LLP shall use thereafter.

Nothing contained in this sub-section shall prevent a LLP from subsequently changing its name in
accordance with the provisions of section 16.

(ii) Small Limited Liability Partnership [Section 2(1)(ta) of the Limited Liability Partnership
Act, 2008]:

It means a limited liability partnership—

(i) the contribution of which, does not exceed twenty-five lakh rupees or such higher amount,
not exceeding five crore rupees, as may be prescribed; and

(ii) the turnover of which, as per the Statement of Accounts and Solvency for the immediately
preceding financial year, does not exceed forty lakh rupees or such higher amount, not exceeding
fifty crore rupees, as may be prescribed; or

(iii) which meets such other requirements as may be prescribed, and fulfils such terms and
conditions as may be prescribed.

07 - State the rules regarding registered office of a Limited Liability Partnership (LLP)
and change therein as per provisions of the Limited Liability Partnership Act, 2008?

RTP,Sept2024

Ans - Registered office of LLP and Change therein (Section 13 of the Limited Liability
Partnership Act, 2008)

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i) Every LLP shall have a registered office to which all communications and notices may be
addressed and where they shall be received.

ii) 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.

iii) 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.

iv) If the LLP contravenes any provisions of this section, the LLP and its every partner shall be
liable to a penalty of ` 500 for each day during which the default continues, subject to a
maximum of ` 50,000 for the LLP and its every partner.

06 - What do you mean by Designated Partner? Whether it is mandatory to appoint

Designated partner in a LLP? 2)c)6m,MDTP5, 2)c)6m,MTP1,Sept2024

Ans - Designated Partner [Section 2(1)(j) of the LLP Act, 2008]: “Designated partner”
means any partner designated as such pursuant to section 7.

According to section 7 of the LLP Act, 2008:

i) Every LLP shall have at least two designated partners who are individuals and at least one of
them shall be a resident in India.

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 individuals who are partners of such LLP or
nominees of such bodies corporate shall act as designated partners.

iii) Resident in India: For the purposes of this section, the term “resident in India” means a
person who has stayed in India for a period of not less than 120 days during the financial year.

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

2)c)6m,MDTP1,6, 2)c)6m,MTP2,Sept2024, 2)c)6m,MTP1,June2024

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

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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. The liability of the partners will be limited to their agreed
contribution in the LLP, while the LLP itself will be liable for the full extent of its assets.

Flexibility of a partnership: The LLP 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 investment by venture capital.

04 - A LLP is a new form of legal business entity with limited liability. It's an alternative
corporate business vehicle that 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. Keeping in view of above, define the following characteristics of
LLP.

i) Body Corporate

ii) Mutual Agency

iii) Foreign LLPs

iv) Artificial legal person

2)c)6m,MDTP8,9, 2)c)6m,MTP2,Jan2025, RTP,Jan2025, 2)c)6m,June2024

Ans - Body corporate: Section 2(1)(d) of the LLP Act, 2008 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 and shall have perpetual succession. Therefore, any change in the partners of a LLP
shall not affect the existence, rights or liabilities of the LLP.

Section 3 of LLP Act, 2008, 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.

Mutual Agency: 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.

Foreign LLPs: Section 2(1)(m) defines foreign limited liability partnership “as a limited liability
partnership formed, incorporated, or registered outside India which established as place of
business within India”. Foreign LLP can become a partner in an Indian LLP.

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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 a learned 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.

03 - A & B were friends. Now they have plans of setting up a supermarket in their
locality. They are confused as to whether to register as a traditional partnership or as a
Limited Liability Partnership. As an advisor, enumerate the differences between the two
forms of business highlighting the compliances & other legal formalities. RTP,June2024

Ans - Comparison between a Limited Liability Partnership (LLP) and partnership can be analysed
on the below tabulated parameters.

Basis LLP Partnership firm

Regulating The Limited Liability Partnership The Indian Partnership Act, 1932.
Act Act 2008.

Body It is a body corporate. It is not a body corporate.

corporate

Separate It is a legal entity separate from It is a group of persons with no separate

legal entity its members. legal entity.

Creation It is created by a legal process It is created by an agreement between

called registration under the LLP the partners.
Act, 2008.

Registration Registration is mandatory. LLP can Registration is voluntary. Only the

sue and be sued in its own name. registered partnership firm can sue the
third parties.

Perpetual The death, insanity, retirement or The death, insanity, retirement or

succession insolvency of the partner(s) does insolvency of the partner(s) may affect
not affect its existence of LLP. its existence. It has no perpetual
Members may join or leave but its succession.
existence continues forever.

Name Name of the LLP to contain the No guidelines. The partners can have any
word limited liability partners (LLP) name as per their choice.
as suffix.

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Liability Liability of each partner limited to Liability of each partner is unlimited. It

the extent to agreed contribution can be extended upto the personal assets
except in case of willful fraud. of the partners.

Mutual Each partner can bind the LLP by Each partner can bind the firm as well as
agency his own acts but not the other other partners by his own acts.
partners.

Designated At least two designated partners There is no provision for such partners
partners and atleast one of them shall be under the Partnership Act, 1932.
resident in India.

Common It may have its common seal as its There is no such concept in partnership
seal official signatures.

Legal Only designated partners are All partners are responsible for all the
compliances responsible for all the compliances compliances and penalties under the Act.
and penalties under this Act.

Annual filing LLP is required to file: Partnership firm is not required to file
of any annual document with the registrar of
(i) Annual statement of accounts
documents firms.
(ii) Statement of solvency

(iii) Annual return with the

registration of LLP every year.

Foreign Foreign nationals can become a Foreign nationals cannot become a partner
partnership partner in a LLP in partnership firm.

Minor as Minor cannot be admitted to the Minor can admitted to benefits of the
partner benefits of LLP. partnership with the prior consent of the
existing partners.

02 - List the differences between the Limited Liability Partnership (LLP) and the Limited
Liability Company. 2)c)6m,MTP2,June2024

OR

“A LLP (Limited Liability Partnership) is a type of partnership which 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.” In line with the above

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statement clearly elaborate the difference between LLP and Limited Liability Company
(LLC). 2)c)6m,MDTP2,3

Ans - Distinction between LLP and Limited Liability Company: The points of distinction between
a LLP and Limited Liability Company are tabulated as follows:

Basis LLP Limited Liability Company

Regulating Act The LLP Act, 2008. The Companies Act, 2013.

Members/Partners The persons who contribute to The persons who invest the money in the
LLP are known as partners of shares are known as members of the
the LLP. company.

Internal The internal governance The internal governance structure of a

governance structure of a LLP is governed company is regulated by statute (i.e.,
structure by contract agreement between Companies Act, 2013).
the partners.

Name Name of the LLP to contain the Name of the public company to contain
word “Limited Liability the word “limited” and Pvt. Co. to
partnership” or “LLP” as suffix. contain the word “Private limited” as
suffix.

No. of members/ Minimum – 2 members Maximum Private company: Minimum – 2 members

partners – No such limit on the members Maximum 200 members
in the Act. The members of the
Public company: Minimum – 7 members
LLP can be individuals/or body
Maximum – No such limit on the
corporate through the
members. Members can be
nominees.
organizations, trusts, another business
form or individuals.

Liability of Liability of the partners is Liability of a member is limited to the

members/partners limited to the extent of agreed amount unpaid on the shares held by
contribution except in case of them.
willful fraud.

Management The business of the company is The affairs of the company are managed
managed by the partners by board of directors elected by the
including the designated shareholders.
partners authorized in the

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agreement.

Minimum number Minimum 2 designated partners. Pvt. Co. – 2 directors

of directors/
Public co. – 3 directors
designated
partners

01 – i) Who are the individuals which shall not be capable of becoming a partner of a
Limited Liability Partnership? (3m)

ii) What are the effects of registration of Limited Liability Partnership? (3m)

2)c)6m,MDTP4, 2)c)6m,MTP3,June2024

Ans – i) Partners (Section 5 of Limited Liability Partnership Act, 2008):

Any individual 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 of 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.

ii) Effect of registration (Section 14 of Limited Liability Partnership Act, 2008):

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

(a) suing and being sued;

(b) acquiring, owning, holding and developing or disposing of property, whether movable or
immovable, tangible or intangible;

(c) having a common seal, if it decides to have one; and

(d) doing and suffering such other acts and things as bodies corporate may lawfully do and
suffer.

Note: Before June 2024 Attempt questions are not included as syllabus is highly changed from
June 2024.

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