Chapter 12: The Limited Liability Partnership Act, 2008 - Test 1: answer key

Question 1 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. Vistaar Habitat LLP was registered in Bhopal for architectural and urban design services. Its partners on incorporation were Rhea Mehta, an individual; Aster Buildtech Private Limited; and Northcape Design Pte. Ltd., a company incorporated in Singapore. Each partner made an agreed contribution, and the LLP acquired studio equipment, licensed software and a commercial unit in its own name. At the end of the year, a bank's working-capital facility remained partly unpaid after the LLP's business slowed. The bank first sought recovery from the LLP and then demanded that Rhea personally pay the entire shortfall, arguing that partners and the LLP were effectively one business. Rhea objected that her obligation could not exceed her agreed contribution merely because she was a partner. During the same year, one of the original partners died. The remaining partners continued client contracts, payroll and rent without registering a new entity. They also debated adopting a common seal. The compliance manager claimed that every LLP must maintain one and that every contract would be invalid without it. The partners proposed instead to use authorised signatures unless a seal became commercially necessary. Separately, a local cooperative credit society offered to join as an additional partner, while a foreign company already held a partnership interest. The partners asked whether the company's foreign incorporation affected eligibility and whether the cooperative society could be admitted merely because it was registered under a separate statute.

The bank seeks to recover the outstanding working-capital shortfall directly from Rhea solely because she is a partner of Vistaar Habitat LLP. Which statement most appropriately describes the legal position regarding the LLP's and Rhea's liability?

1. The LLP and all its partners are jointly liable for every contractual obligation incurred in the ordinary course of business.
2. The LLP is liable to the full extent of its assets, while Rhea's liability is limited to her agreed contribution. (correct answer)
3. Rhea is personally liable for the entire shortfall because an LLP is merely a partnership registered under a different name.
4. The bank can recover the shortfall from Rhea's personal assets whenever the LLP's own assets are insufficient.

Answer: B — The LLP is liable to the full extent of its assets, while Rhea's liability is limited to her agreed contribution.

Explanation. An LLP is a body corporate and a legal entity separate from its partners under Section 3. The LLP itself is liable to the full extent of its assets, whereas a partner's liability is limited to the extent prescribed by the Act, including the agreed contribution. The bank cannot impose personal liability on Rhea merely because she is a partner. The primary distractor incorrectly treats the LLP as an ordinary partnership firm with unlimited mutual liability.

Where it goes wrong. Confusing an LLP's liability with the unlimited liability of partners in an ordinary partnership firm.

Authority. Section 3 of the Limited Liability Partnership Act, 2008; Section 28 of the Limited Liability Partnership Act, 2008

Question 2 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

The compliance manager insists that Vistaar Habitat LLP must have a common seal and that no contract can be executed without it. The partners are considering retaining the option of adopting a seal only if commercially necessary. Which advice is correct under the LLP Act and the characteristics explained in the study material?

1. A common seal is compulsory for every LLP, and its absence invalidates all contracts executed by the LLP.
2. A common seal is compulsory only where an LLP has a body corporate as one of its partners.
3. A common seal is optional, and if adopted, it may be affixed by any partner acting independently.
4. A common seal is optional; if adopted, it must be kept with a responsible official and affixed in the presence of at least two designated partners. (correct answer)

Answer: D — A common seal is optional; if adopted, it must be kept with a responsible official and affixed in the presence of at least two designated partners.

Explanation. Section 14(c) recognises that an LLP may have a common seal if it decides to adopt one. Therefore, maintaining a seal is not compulsory. The study material further states that an adopted seal should remain in the custody of a responsible official and be affixed in the presence of at least two designated partners. The distractor treating the seal as compulsory ignores the statutory optional nature of this characteristic.

Where it goes wrong. Treating the common seal as a mandatory feature of an LLP merely because it is a body corporate.

Authority. Section 14(c) of the Limited Liability Partnership Act, 2008

Question 3 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

One of Vistaar Habitat LLP's original partners dies, but the remaining partners continue the business, contracts and ownership of assets in the LLP's name. A creditor argues that the death of a partner automatically terminates the LLP and requires a fresh incorporation. Which legal principle determines the validity of the LLP's continued existence?

1. Perpetual succession, under which a change in partners does not affect the LLP's existence, rights or liabilities. (correct answer)
2. Mutual agency, under which the surviving partners automatically become owners of the deceased partner's personal assets.
3. Voluntary registration, under which the LLP remains valid only if every surviving partner signs a fresh incorporation document.
4. Limited contribution, under which the LLP is dissolved whenever any partner dies or becomes insolvent.

Answer: A — Perpetual succession, under which a change in partners does not affect the LLP's existence, rights or liabilities.

Explanation. Section 3 provides that an LLP is a body corporate, separate from its partners, and has perpetual succession. Consequently, the death, retirement, insolvency or other change in the constitution of its partners does not by itself affect the LLP's existence, rights or liabilities. The creditor's argument incorrectly applies the consequences of a traditional partnership to a separate corporate entity. No fresh incorporation is required merely because a partner dies.

Where it goes wrong. Assuming that an LLP automatically dissolves whenever one of its partners dies.

Authority. Section 3(1) of the Limited Liability Partnership Act, 2008; Section 3(2) of the Limited Liability Partnership Act, 2008

Question 4 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Vistaar Habitat LLP already has a foreign company as a partner. A cooperative credit society now seeks admission as another partner, arguing that it is registered under a separate statute and therefore must qualify as a body corporate. Which conclusion is most appropriate under the LLP Act?

1. Both entities may become partners because every entity registered under a statute is automatically a body corporate under the LLP Act.
2. Neither entity may become a partner because an LLP can admit only Indian individuals as its partners.
3. The foreign company may become a partner as a body corporate, but a cooperative society is expressly excluded from the statutory definition of body corporate. (correct answer)
4. The cooperative society may become a partner, but a company incorporated outside India cannot become a partner in an Indian LLP.

Answer: C — The foreign company may become a partner as a body corporate, but a cooperative society is expressly excluded from the statutory definition of body corporate.

Explanation. Section 5 permits an individual or a body corporate to become a partner in an LLP. The definition of body corporate under Section 2(1)(d) includes a company incorporated outside India, but expressly excludes a cooperative society registered under any law for the time being in force. Therefore, the foreign company is eligible, while the cooperative society cannot qualify merely through its separate statutory registration. The primary distractor incorrectly assumes that every registered entity is included.

Where it goes wrong. Overlooking the express exclusion of cooperative societies from the definition of body corporate.

Authority. Section 2(1)(d) of the Limited Liability Partnership Act, 2008; Section 5 of the Limited Liability Partnership Act, 2008

Question 5 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Scenario. Orion Medical Devices LLP was incorporated on 1 April 2025 with three partners: Nidhi and Omar, both individuals, and Veda Components Private Limited, a body corporate. Its incorporation document designated Nidhi and Vikram, an individual nominated by Veda Components, as the designated partners. During the financial year 2025–26, Nidhi stayed in India for 119 days, Vikram for exactly 120 days and Omar for 170 days. Omar was initially an ordinary partner and was not named as a designated partner. The partners assumed that Nidhi's longer association with the LLP would be sufficient to satisfy the residency requirement, although Vikram was the only designated partner who had completed the statutory minimum number of days in India. On 3 May 2026, the partners appointed Omar as an additional designated partner under the LLP Agreement. Omar gave his written consent before appointment and already held the required identification number. However, the LLP filed his particulars with the Registrar on 4 June 2026. The finance manager argued that the filing delay should be ignored because Omar's written consent was available from the date of appointment. Meanwhile, the LLP received a notice concerning a statutory filing that had not been completed. The partners disagreed about whether every partner or only designated partners were responsible for ensuring statutory compliance and facing penalties imposed on the LLP. The compliance officer was asked to advise the partners on the composition, residency, appointment and statutory responsibilities of designated partners.

At the time of incorporation, Nidhi and Vikram were the two designated partners of Orion Medical Devices LLP. Nidhi stayed in India for 119 days and Vikram for exactly 120 days during the financial year. Omar, who was not a designated partner at that time, stayed in India for 170 days. Which conclusion correctly applies the statutory residency test?

1. The residency requirement is satisfied because Vikram, a designated partner, stayed in India for at least 120 days during the financial year. (correct answer)
2. The residency requirement is not satisfied because every designated partner must stay in India for at least 120 days.
3. The residency requirement is satisfied only if Nidhi and Vikram together complete 120 days of stay in India.
4. The residency requirement is not satisfied because Omar must be counted instead of the designated partners.

Answer: A — The residency requirement is satisfied because Vikram, a designated partner, stayed in India for at least 120 days during the financial year.

Explanation. Section 7(1) requires at least two designated partners who are individuals, of whom at least one must be resident in India. The Explanation defines resident in India as a person who has stayed in India for not less than 120 days during the financial year. Vikram meets this threshold exactly. Nidhi's 119 days would not qualify, while Omar's stay is irrelevant to the test at incorporation because he was not a designated partner.

Where it goes wrong. Applying the 120-day requirement to every partner or requiring every designated partner to satisfy it.

Authority. Section 7(1) of the Limited Liability Partnership Act, 2008

Question 6 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Veda Components Private Limited argues that it should itself be appointed as one of Orion Medical Devices LLP's designated partners because it is a body corporate partner. It has nominated Vikram, an individual, to perform the statutory functions. Which arrangement satisfies the requirements concerning the identity and number of designated partners?

1. Nidhi and Veda Components may act as designated partners because the LLP has both an individual and a body corporate partner.
2. Veda Components alone may act as designated partner because a body corporate partner can discharge all statutory responsibilities through its board.
3. Nidhi and Vikram may act as designated partners because both are individuals, with Vikram acting as the nominee of the body corporate partner. (correct answer)
4. Only Vikram may act as designated partner because a nominee of a body corporate replaces the need for an individual partner.

Answer: C — Nidhi and Vikram may act as designated partners because both are individuals, with Vikram acting as the nominee of the body corporate partner.

Explanation. Section 7(1) requires at least two designated partners who are individuals. Where an LLP has a combination of individual and body corporate partners, at least two individuals who are partners or nominees of body corporate partners must act as designated partners. Nidhi and Vikram satisfy the individual requirement. Veda Components itself cannot be appointed as a designated partner because it is not an individual. The primary distractor confuses a partner's status with eligibility to act as a designated partner.

Where it goes wrong. Assuming that a body corporate can itself be appointed as a designated partner.

Authority. Section 7(1) of the Limited Liability Partnership Act, 2008

Question 7 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Omar was appointed as an additional designated partner on 3 May 2026. He gave his prior written consent, but Orion Medical Devices LLP filed his particulars with the Registrar only on 4 June 2026. The finance manager contends that the requirement is satisfied because consent was obtained before appointment. What is the correct position regarding the filing deadline?

1. The filing is valid because the LLP only needs to file particulars before the end of the financial year.
2. The filing is delayed because the LLP must file the particulars within 30 days of the designated partner's appointment. (correct answer)
3. The filing is valid because prior consent automatically replaces the requirement to file particulars with the Registrar.
4. The filing is delayed only if the designated partner fails to obtain a DPIN within 30 days of appointment.

Answer: B — The filing is delayed because the LLP must file the particulars within 30 days of the designated partner's appointment.

Explanation. Section 7(3) requires prior consent of an individual before becoming a designated partner. Separately, Section 7(4) requires the LLP to file the particulars of the consenting individual with the Registrar within 30 days of appointment. Filing on 4 June for an appointment on 3 May is beyond the prescribed period. The existence of prior consent does not dispense with the separate filing obligation. The primary distractor confuses consent with filing.

Where it goes wrong. Treating prior consent as a substitute for filing the designated partner's particulars within 30 days.

Authority. Section 7(3) of the Limited Liability Partnership Act, 2008; Section 7(4) of the Limited Liability Partnership Act, 2008; Section 10(2) of the Limited Liability Partnership Act, 2008

Question 8 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

After receiving a statutory notice for a delayed filing, Orion Medical Devices LLP's ordinary partners argue that the compliance officer alone must be responsible. The compliance officer states that the LLP Agreement has assigned statutory compliance to its designated partners. Which statement most accurately reflects the responsibility of designated partners under the LLP Act?

1. Designated partners are responsible only for maintaining accounting records and have no responsibility for statutory filings.
2. Designated partners are responsible only when the LLP Agreement expressly makes them personally liable for every business debt.
3. Every ordinary partner is automatically responsible for all statutory filings and penalties in the same manner as a designated partner.
4. Designated partners are responsible for statutory acts and filings and are liable to penalties imposed on the LLP for relevant contraventions. (correct answer)

Answer: D — Designated partners are responsible for statutory acts and filings and are liable to penalties imposed on the LLP for relevant contraventions.

Explanation. Section 8 makes designated partners responsible for the acts, matters and things required to be done by the LLP for compliance with the Act, including filing documents, returns and statements. It also makes them liable to penalties imposed on the LLP for contraventions of those provisions. This is a statutory responsibility, not merely a contractual allocation under the LLP Agreement. The primary distractor incorrectly treats every ordinary partner as having identical compliance responsibilities.

Where it goes wrong. Confusing the general rights of partners with the specific statutory compliance responsibilities of designated partners.

Authority. Section 8 of the Limited Liability Partnership Act, 2008

Question 9 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. Meghdoot Biofuels LLP was initially formed by Ritu Sharma, an individual, and Terra Fuels Private Limited. The LLP had two designated partners, Ritu and Ajay, and carried on a lawful commercial business. Terra Fuels ceased to be a partner with effect from 1 April 2026, leaving Ritu as the only partner. Ritu knew about the change immediately, but the LLP continued purchasing raw materials, supplying customers and entering into fresh contracts. It incurred an obligation of ₹8 lakh on 30 September 2026 and another obligation of ₹14 lakh on 5 October 2026. A new partner was admitted on 20 October 2026, restoring the minimum number of partners. Separately, Ajay resigned as a designated partner on 3 October 2026. Ritu was therefore the only designated partner for a period. The LLP appointed Meenal as a replacement designated partner on 27 October 2026, after obtaining her consent and completing the necessary identification formalities. The finance manager believed that Ritu was personally liable for every obligation incurred after Terra Fuels ceased to be a partner, irrespective of the six-month period. Another manager argued that the remaining designated partner could independently discharge every compliance responsibility without any change in the statutory position of the other partners. The LLP's legal adviser was asked to examine the precise consequences of the reduced partner strength, the temporary designated-partner vacancy and the dates on which the replacement was appointed.

Terra Fuels Private Limited ceased to be a partner of Meghdoot Biofuels LLP on 1 April 2026. Ritu knew immediately that she had become the only partner. The LLP continued business and incurred an obligation of ₹8 lakh on 30 September 2026. Which statement correctly determines Ritu's personal liability for this particular obligation under Section 6?

1. Ritu is personally liable because the LLP had only one partner from the date Terra Fuels ceased to be a partner.
2. Ritu is not personally liable under the special rule in Section 6 because the obligation arose before the LLP had carried on business for more than six months with one partner. (correct answer)
3. Ritu is automatically liable for the entire obligation because the LLP loses its separate legal identity whenever it has one partner.
4. Ritu is liable only if the Registrar first issues a notice cancelling the LLP's certificate of incorporation.

Answer: B — Ritu is not personally liable under the special rule in Section 6 because the obligation arose before the LLP had carried on business for more than six months with one partner.

Explanation. Section 6 requires every LLP to have at least two partners. However, the special personal-liability consequence under Section 6(2) applies where the LLP carries on business for more than six months with fewer than two partners, and the sole partner knows that it is carrying on business with that person alone. The 30 September obligation arose before the six-month period had been exceeded. The primary distractor incorrectly makes personal liability retrospective from the date the second partner leaves.

Where it goes wrong. Calculating the personal-liability period from the date of the partner's departure without applying the more-than-six-month threshold.

Authority. Section 6(1) of the Limited Liability Partnership Act, 2008; Section 6(2) of the Limited Liability Partnership Act, 2008

Question 10 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Meghdoot Biofuels LLP continued business with Ritu as its sole partner from 1 April 2026. Ritu knew about the reduction in partner strength. The LLP incurred a fresh obligation of ₹14 lakh on 5 October 2026, before a second partner was admitted on 20 October 2026. What is the correct position concerning this obligation?

1. Ritu is personally liable for this obligation because it was incurred after the LLP had carried on business for more than six months with her knowledge as sole partner. (correct answer)
2. Ritu is not personally liable because the LLP's separate legal personality always excludes personal liability of its sole partner.
3. Ritu is personally liable for every obligation incurred from 1 April 2026, including those arising before the six-month period expired.
4. Ritu becomes personally liable only if the LLP continues business with one partner for more than twelve months.

Answer: A — Ritu is personally liable for this obligation because it was incurred after the LLP had carried on business for more than six months with her knowledge as sole partner.

Explanation. The LLP had only one partner from 1 April 2026, and Ritu knew of that position. By 5 October 2026, the LLP had continued business for more than six months with a single partner. Ritu therefore becomes personally liable under Section 6(2) for obligations incurred during the period after those six months while she continues as the knowledgeable sole partner. The provision does not make her retrospectively liable for every earlier obligation.

Where it goes wrong. Assuming either that personal liability begins immediately on the partner's departure or that it never arises for an LLP.

Authority. Section 6(2) of the Limited Liability Partnership Act, 2008

Question 11 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Ajay resigned as a designated partner of Meghdoot Biofuels LLP on 3 October 2026, leaving Ritu as the only designated partner. Meenal was not appointed until 27 October 2026. During the intervening period, the LLP continued its business. Which statutory consequence follows from the fact that only one designated partner remained?

1. The LLP is automatically dissolved because it cannot continue business with only one designated partner.
2. The remaining designated partner alone is deemed responsible, and all other partners are permanently excluded from compliance responsibilities.
3. The LLP may continue without any designated partner for an unlimited period, provided it has two ordinary partners.
4. Each partner is deemed to be a designated partner during the period in which only one designated partner exists. (correct answer)

Answer: D — Each partner is deemed to be a designated partner during the period in which only one designated partner exists.

Explanation. Section 9 permits an LLP to appoint a designated partner within 30 days of a vacancy arising. Its proviso further states that if no designated partner is appointed, or if at any time there is only one designated partner, each partner shall be deemed to be a designated partner. Therefore, while Ritu was the only designated partner, the statutory deeming provision applied. The primary distractor wrongly treats the remaining designated partner as the sole person covered by the provision.

Where it goes wrong. Overlooking the deeming provision that applies when an LLP has only one designated partner.

Authority. Section 9 of the Limited Liability Partnership Act, 2008

Question 12 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Ajay's designated-partner vacancy arose on 3 October 2026. Meghdoot Biofuels LLP appointed Meenal on 27 October 2026, obtained her prior consent and completed the identification formalities. Which conclusion most appropriately reflects the statutory requirements governing this replacement appointment?

1. The appointment is invalid because a replacement designated partner must be appointed within 15 days of the vacancy.
2. The appointment is invalid because only an ordinary partner who was a designated partner at incorporation can replace a resigning designated partner.
3. The appointment is within the 30-day period, and the applicable consent and eligibility requirements under Section 7 also apply to Meenal. (correct answer)
4. The appointment is valid only if the Registrar first grants approval and the LLP obtains a fresh certificate of incorporation.

Answer: C — The appointment is within the 30-day period, and the applicable consent and eligibility requirements under Section 7 also apply to Meenal.

Explanation. Section 9 permits appointment of a designated partner within 30 days from the date a vacancy arises. The period from 3 October to 27 October is 24 days, so the appointment is within the statutory window. Section 9 also applies the requirements of Section 7(4) and Section 7(5) to the new designated partner. Prior consent and compliance with the prescribed eligibility and filing requirements remain necessary. The primary distractor invents a 15-day deadline.

Where it goes wrong. Confusing the 30-day replacement period with other statutory filing deadlines.

Authority. Section 7(3) of the Limited Liability Partnership Act, 2008; Section 7(4) of the Limited Liability Partnership Act, 2008; Section 7(5) of the Limited Liability Partnership Act, 2008; Section 9 of the Limited Liability Partnership Act, 2008

Question 13 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Scenario. Ananya and Dev decided to establish Sattva Fibre Process LLP to manufacture and commercially sell biodegradable packaging material. They proposed a lawful business with an intention to earn profits and agreed to subscribe their names to the incorporation document. Their first proposed name, GreenPath Packaging LLP, was found to resemble a registered trademark. They therefore submitted a revised name, Sattva Fibre Process LLP, which the Registrar intimated as reserved on 10 August 2026. The promoters submitted Form FiLLiP for incorporation on 9 November 2026. Their draft incorporation document stated the proposed name, business activity and registered-office address. However, the promoters initially omitted the addresses of the proposed designated partners and assumed that the LLP Agreement could be filed later as a substitute for those particulars. They also arranged for a practising Chartered Accountant engaged in the formation of the LLP and one subscriber to make the prescribed statement confirming compliance with the Act and Rules. During verification, the Chartered Accountant discovered that one subscriber had knowingly supplied a false address in the information supporting incorporation. The subscriber argued that the Registrar was responsible for checking the information and that the statement would not attract any personal consequence. The promoters sought advice on the restrictions governing LLP names, the validity period of the reservation, the contents and filing of the incorporation document, and the consequences of making a knowingly false statement.

The Registrar objected to the original proposed name, GreenPath Packaging LLP, because it too closely resembled a registered trademark. The promoters argue that adding the suffix LLP should be sufficient to distinguish the proposed entity. Which statement correctly describes the statutory restriction on registration of an LLP name?

1. The name must be accepted because adding the suffix LLP always cures similarity with an existing trademark.
2. The name may be accepted if the promoters undertake not to use the trademark owner's business activities.
3. The name can be rejected only when it is identical to another registered LLP and not when it resembles a trademark.
4. The name may be rejected if it is undesirable or identical with, or too nearly resembles, another LLP, a company or a registered trademark. (correct answer)

Answer: D — The name may be rejected if it is undesirable or identical with, or too nearly resembles, another LLP, a company or a registered trademark.

Explanation. Section 15 prohibits registration of an LLP by a name considered undesirable by the Central Government or one that is identical with or too nearly resembles another LLP, a company or a registered trademark of another person. Adding the suffix LLP does not override this restriction. The primary distractor incorrectly assumes that compliance with the naming suffix requirement automatically cures similarity with an existing protected name or trademark.

Where it goes wrong. Assuming that adding the mandatory LLP suffix automatically makes a similar name acceptable.

Authority. Section 15 of the Limited Liability Partnership Act, 2008

Question 14 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

The Registrar intimated reservation of the revised name, Sattva Fibre Process LLP, on 10 August 2026. The promoters submitted Form FiLLiP on 9 November 2026. Assuming that the name was otherwise eligible for reservation, which statement correctly determines whether the reservation was still within its statutory validity period?

1. The reservation expired because a reserved LLP name remains valid for only 60 days from the date of application.
2. The reservation remains valid because the three-month period runs from the date of intimation by the Registrar. (correct answer)
3. The reservation expired because the period of three months is calculated from the first day of the financial year.
4. The reservation remains valid only if the promoters obtain a further extension from the Central Government before filing.

Answer: B — The reservation remains valid because the three-month period runs from the date of intimation by the Registrar.

Explanation. Under Section 16(2), the Registrar may reserve an eligible name for a period of three months from the date of intimation by the Registrar. Here, the relevant date is 10 August 2026, not the date on which the promoters applied. Filing on 9 November 2026 falls within the three-month period ending on 10 November 2026. The primary distractor incorrectly calculates the period from the application date.

Where it goes wrong. Calculating the three-month reservation period from the application date instead of the Registrar's intimation.

Authority. Section 16(1) of the Limited Liability Partnership Act, 2008; Section 16(2) of the Limited Liability Partnership Act, 2008

Question 15 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

During verification of Sattva Fibre Process LLP's proposed incorporation, the promoters realise that their draft omits the addresses of the proposed designated partners. They also ask whether the prescribed compliance statement can be signed only by their Chartered Accountant. Which course of action correctly addresses the requirements for incorporation?

1. State the proposed name, business and registered office, omit partner addresses, and attach a statement signed only by the professional engaged in formation.
2. State each partner's name but not each designated partner's particulars, and attach a statement signed collectively by all proposed partners.
3. State the name, proposed business, registered office and names and addresses of partners and designated partners, with the required statement by a qualified professional and one subscriber. (correct answer)
4. State capital projections and profit ratios instead of designated-partner addresses, and attach a statement signed only by the designated partners.

Answer: C — State the name, proposed business, registered office and names and addresses of partners and designated partners, with the required statement by a qualified professional and one subscriber.

Explanation. Section 11(2) requires the incorporation document to state the LLP's name, proposed business, registered-office address, and the names and addresses of the persons who will be partners and designated partners on incorporation. Under Section 11(1)(c), the prescribed statement must be made by an eligible professional engaged in the formation and by any one subscriber. A professional's signature alone is insufficient. The primary distractor omits mandatory particulars and the subscriber's confirmation.

Where it goes wrong. Omitting designated partners' addresses or assuming the professional can sign the incorporation compliance statement alone.

Authority. Section 11(1) of the Limited Liability Partnership Act, 2008; Section 11(2) of the Limited Liability Partnership Act, 2008; Rule 11 of the Limited Liability Partnership Rules, 2009; MCA Instruction Kit for Form FiLLiP

Question 16 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

One subscriber knowingly supplied a false address in the information supporting Sattva Fibre Process LLP's incorporation. The subscriber argues that only the LLP can face consequences because the Registrar processes the incorporation application. Which statement correctly describes the statutory consequence where a person makes the prescribed statement knowing it to be false or not believing it to be true?

1. The person may face imprisonment up to two years and a fine ranging from ₹10,000 to ₹5 lakh. (correct answer)
2. The person is liable only to a fixed monetary penalty of ₹5,000 without any possibility of imprisonment.
3. The person may face imprisonment up to one year and a fine ranging from ₹5,000 to ₹1 lakh.
4. The person is not personally liable because responsibility for verifying the statement rests exclusively with the Registrar.

Answer: A — The person may face imprisonment up to two years and a fine ranging from ₹10,000 to ₹5 lakh.

Explanation. Section 11(3) applies where a person makes the prescribed statement knowing it to be false or not believing it to be true. Such person may be punished with imprisonment for a term extending to two years and a fine of not less than ₹10,000, which may extend to ₹5 lakh. The provision concerns the person making the false statement; it does not transfer responsibility exclusively to the Registrar. The primary distractor wrongly treats the matter as an administrative filing error.

Where it goes wrong. Confusing the consequences of a knowingly false incorporation statement with ordinary filing-delay penalties.

Authority. Section 11(3) of the Limited Liability Partnership Act, 2008

Question 17 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Scenario. Four individuals have expressed interest in becoming partners of a proposed LLP. A court has declared Applicant A to be of unsound mind and the finding remains in force. Applicant B is an undischarged insolvent. Applicant C has applied to be adjudicated as insolvent and the application is pending. Applicant D was previously declared insolvent but has since been discharged, and no insolvency application is pending. Assuming no other disqualification, who is eligible under Section 5?

Four individuals have expressed interest in becoming partners of a proposed LLP. A court has declared Applicant A to be of unsound mind and the finding remains in force. Applicant B is an undischarged insolvent. Applicant C has applied to be adjudicated as insolvent and the application is pending. Applicant D was previously declared insolvent but has since been discharged, and no insolvency application is pending. Assuming no other disqualification, who is eligible under Section 5?

1. Applicants A and D are eligible because only an undischarged insolvent is disqualified.
2. Applicants B and C are eligible because insolvency affects only the right to act as a designated partner.
3. Applicant D is not disqualified by the stated conditions and may become a partner, subject to other applicable requirements. (correct answer)
4. All four applicants are eligible because an individual can become a partner irrespective of mental capacity or insolvency status.

Answer: C — Applicant D is not disqualified by the stated conditions and may become a partner, subject to other applicable requirements.

Explanation. Section 5 permits an individual to become a partner unless the individual has been found to be of unsound mind by a competent court and the finding remains in force, is an undischarged insolvent, or has applied to be adjudicated as insolvent with the application pending. Applicants A, B and C fall within these exclusions. Applicant D has been discharged and has no pending application, so none of the stated disqualifications applies. The primary distractor incorrectly treats a past insolvency as a continuing disqualification.

Where it goes wrong. Treating a previously discharged insolvent as permanently disqualified.

Authority. Section 5 of the Limited Liability Partnership Act, 2008

Question 18 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. A family-owned enterprise proposes to become a partner of an LLP in the name of its Hindu Undivided Family. The promoters argue that the HUF should qualify because it consists of several individuals and conducts business collectively. The Karta is separately willing to join in his own individual capacity. Under the LLP Act's provisions concerning partners and body corporates, which conclusion is correct?

A family-owned enterprise proposes to become a partner of an LLP in the name of its Hindu Undivided Family. The promoters argue that the HUF should qualify because it consists of several individuals and conducts business collectively. The Karta is separately willing to join in his own individual capacity. Under the LLP Act's provisions concerning partners and body corporates, which conclusion is correct?

1. The HUF itself may become a partner because every association of individuals qualifies as a body corporate.
2. The HUF itself is not eligible merely as an HUF, although the Karta may become a partner in his individual capacity if otherwise eligible. (correct answer)
3. Neither the HUF nor its Karta can become a partner because family-owned enterprises are excluded from LLPs.
4. The HUF may become a partner only if the Registrar separately registers it as a designated partner.

Answer: B — The HUF itself is not eligible merely as an HUF, although the Karta may become a partner in his individual capacity if otherwise eligible.

Explanation. Section 5 permits an individual or a body corporate to become a partner. The LLP Act's definition of body corporate does not include a Hindu Undivided Family, and the HUF itself is not an individual for this purpose. However, the Karta may become a partner in his individual capacity if none of the statutory disqualifications applies. The primary distractor incorrectly treats the HUF as a separate body corporate merely because it consists of family members.

Where it goes wrong. Confusing an HUF with an individual or a body corporate eligible to become an LLP partner.

Authority. Section 2(1)(d) of the Limited Liability Partnership Act, 2008; Section 5 of the Limited Liability Partnership Act, 2008

Question 19 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Scenario. A group of promoters proposes to register an LLP exclusively to operate a non-economic charitable initiative. The activity is lawful, but the promoters have expressly stated that it will not be carried on with a view to earning profits. They argue that limited liability is available to any lawful association irrespective of its objective. Which conclusion follows from the incorporation requirements of the LLP Act?

A group of promoters proposes to register an LLP exclusively to operate a non-economic charitable initiative. The activity is lawful, but the promoters have expressly stated that it will not be carried on with a view to earning profits. They argue that limited liability is available to any lawful association irrespective of its objective. Which conclusion follows from the incorporation requirements of the LLP Act?

1. The proposed LLP cannot be incorporated for this stated purpose because the required association must carry on a lawful business with a view to earn profit. (correct answer)
2. The proposed LLP may be incorporated because the only statutory requirement is that its activities should not be prohibited by law.
3. The proposed LLP may be incorporated if the promoters agree that no surplus will be distributed among its partners.
4. The proposed LLP may be incorporated because the profit objective applies only to companies and not to LLPs.

Answer: A — The proposed LLP cannot be incorporated for this stated purpose because the required association must carry on a lawful business with a view to earn profit.

Explanation. Section 11(1)(a) requires two or more persons to be associated for carrying on a lawful business with a view to earn profit before subscribing to an incorporation document. The study material accordingly explains that an LLP cannot be formed solely for charitable or non-economic purposes. The fact that an activity is lawful does not by itself satisfy the separate profit-objective requirement. The primary distractor ignores this additional statutory condition.

Where it goes wrong. Assuming that every lawful activity, including a purely non-economic charitable purpose, can be carried on through an LLP.

Authority. Section 11(1)(a) of the Limited Liability Partnership Act, 2008; Section 2(1)(e) of the Limited Liability Partnership Act, 2008

Question 20 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. A promoter submits four alternative names for a proposed LLP. The names are otherwise acceptable and do not resemble any existing LLP, company or registered trademark. The promoter wants to know which name satisfies the statutory requirement concerning the last words of an LLP's name. Select the correct name, keeping in mind that the prescribed expression must appear at the end rather than merely somewhere within the name.

A promoter submits four alternative names for a proposed LLP. The names are otherwise acceptable and do not resemble any existing LLP, company or registered trademark. The promoter wants to know which name satisfies the statutory requirement concerning the last words of an LLP's name. Select the correct name, keeping in mind that the prescribed expression must appear at the end rather than merely somewhere within the name.

1. Amber LLP Ventures, because the acronym LLP appears immediately after the first word of the proposed name.
2. Amber Ventures Limited, because the word Limited sufficiently identifies the proposed entity as a limited liability organisation.
3. Amber Ventures Private Limited, because the suffix used by private companies is also sufficient for an LLP.
4. Amber Ventures LLP, because the acronym LLP appears as the final words of the proposed name. (correct answer)

Answer: D — Amber Ventures LLP, because the acronym LLP appears as the final words of the proposed name.

Explanation. Section 15(1) requires every LLP to have either the words Limited Liability Partnership or the acronym LLP as the last words of its name. Amber Ventures LLP satisfies the requirement because LLP is placed at the end. The other proposed names either place LLP before additional words or use suffixes associated with other forms of business organisation. The primary distractor overlooks the importance of the statutory suffix appearing at the end.

Where it goes wrong. Checking only whether the expression LLP appears somewhere in the name instead of verifying its position at the end.

Authority. Section 15(1) of the Limited Liability Partnership Act, 2008

Question 21 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. An LLP has operated for 550 days in continuing contravention of Section 7(1), because it has failed to maintain at least two designated partners who are individuals. Assume the contravention continued throughout all 550 days and no other penalty provision applies. What is the correct penalty position on these facts, after applying the statutory limits separately to the LLP and each partner?

An LLP has operated for 550 days in continuing contravention of Section 7(1), because it has failed to maintain at least two designated partners who are individuals. Assume the contravention continued throughout all 550 days and no other penalty provision applies. What is the correct penalty position on these facts, after applying the statutory limits separately to the LLP and each partner?

1. The LLP and every partner are liable to ₹64,900 because the daily additional penalty is identical for each person.
2. The LLP is liable to ₹64,900, while each partner is liable subject to the separate maximum of ₹50,000. (correct answer)
3. The LLP is liable to ₹1,00,000 and each partner is liable to ₹1,00,000 because the same maximum applies to both.
4. The LLP is liable to ₹10,000 only, because continuing contraventions do not attract an additional daily penalty.

Answer: B — The LLP is liable to ₹64,900, while each partner is liable subject to the separate maximum of ₹50,000.

Explanation. For a Section 7(1) contravention, Section 10(1) prescribes ₹10,000 initially and an additional ₹100 for each day after the first during which the contravention continues. For 550 days, the LLP's calculation is ₹10,000 plus ₹54,900, totalling ₹64,900. Each partner is separately subject to a maximum penalty of ₹50,000, while the LLP's maximum is ₹1,00,000. The primary distractor wrongly applies the LLP's maximum to individual partners.

Where it goes wrong. Applying the LLP's ₹1,00,000 maximum penalty to every partner instead of the separate ₹50,000 limit.

Authority. Section 7(1) of the Limited Liability Partnership Act, 2008; Section 10(1) of the Limited Liability Partnership Act, 2008

Question 22 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. An LLP appointed a designated partner and obtained the individual's prior consent. However, it failed to file the required particulars with the Registrar within the statutory period. The contravention continued for 210 days, including the first day of the continuing contravention. What is the correct penalty position under Section 10(2), applying the separate maximum limits for the LLP and its designated partners?

An LLP appointed a designated partner and obtained the individual's prior consent. However, it failed to file the required particulars with the Registrar within the statutory period. The contravention continued for 210 days, including the first day of the continuing contravention. What is the correct penalty position under Section 10(2), applying the separate maximum limits for the LLP and its designated partners?

1. The LLP and every designated partner are each liable to ₹25,900 without any separate statutory maximum.
2. The LLP is liable to ₹50,000, while each designated partner is liable to ₹25,900.
3. The LLP is liable to ₹25,900, while each designated partner is subject to a maximum penalty of ₹25,000. (correct answer)
4. The LLP is liable to ₹5,000, while each designated partner is liable to ₹50,000.

Answer: C — The LLP is liable to ₹25,900, while each designated partner is subject to a maximum penalty of ₹25,000.

Explanation. Section 10(2) imposes an initial penalty of ₹5,000 for failure to comply with Section 7(4), together with ₹100 for each day after the first during which the contravention continues. For 210 days, the LLP's calculated penalty is ₹5,000 plus ₹20,900, totalling ₹25,900. The LLP's maximum is ₹50,000, whereas each designated partner's maximum is ₹25,000. The primary distractor ignores these separate limits.

Where it goes wrong. Using one common maximum for the LLP and its designated partners instead of applying their separate limits.

Authority. Section 7(4) of the Limited Liability Partnership Act, 2008; Section 10(2) of the Limited Liability Partnership Act, 2008

Question 23 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · hard

Scenario. An LLP had two designated partners. One resigned, and the LLP appointed a replacement only on the 38th day after the vacancy arose. During the intervening period, only one designated partner remained. Which statement correctly describes the statutory position arising from the delayed appointment and the consequences under the LLP Act?

An LLP had two designated partners. One resigned, and the LLP appointed a replacement only on the 38th day after the vacancy arose. During the intervening period, only one designated partner remained. Which statement correctly describes the statutory position arising from the delayed appointment and the consequences under the LLP Act?

1. The appointment is automatically valid because Section 9 allows an unlimited period to fill a designated-partner vacancy.
2. The remaining designated partner alone is deemed responsible, and no penalty can arise once a replacement is appointed.
3. The LLP is dissolved because a vacancy in the designated-partner position cannot be filled after 30 days.
4. The 30-day appointment period was exceeded; each partner is deemed a designated partner while only one remains, and Section 10(3) provides for a penalty for the Section 9 contravention. (correct answer)

Answer: D — The 30-day appointment period was exceeded; each partner is deemed a designated partner while only one remains, and Section 10(3) provides for a penalty for the Section 9 contravention.

Explanation. Section 9 allows an LLP to appoint a designated partner within 30 days of the vacancy. Appointment on the 38th day exceeds this period. Its proviso states that where there is only one designated partner, each partner is deemed to be a designated partner. Section 10(3) prescribes the penalty for contravention of Section 9. The primary distractor incorrectly assumes that a subsequent appointment retrospectively eliminates the earlier contravention.

Where it goes wrong. Assuming that a late replacement automatically cures the earlier contravention and removes the statutory deeming consequence.

Authority. Section 9 of the Limited Liability Partnership Act, 2008; Section 10(3) of the Limited Liability Partnership Act, 2008

Question 24 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Scenario. A proposed LLP has identified two individuals to act as designated partners. One promoter argues that a person's status as an ordinary partner is enough and that no separate identification formalities are necessary. The other promoter insists that each designated partner must obtain the statutory identification number. Which position is consistent with the LLP Act?

A proposed LLP has identified two individuals to act as designated partners. One promoter argues that a person's status as an ordinary partner is enough and that no separate identification formalities are necessary. The other promoter insists that each designated partner must obtain the statutory identification number. Which position is consistent with the LLP Act?

1. Every designated partner must obtain a DPIN from the Central Government, and the relevant provisions of Sections 153 to 159 of the Companies Act, 2013 apply mutatis mutandis. (correct answer)
2. Only the LLP itself must obtain an identification number, because individual designated partners are identified through the LLP's registration certificate.
3. Only one designated partner needs a DPIN, provided the remaining designated partners are named in the LLP Agreement.
4. A designated partner needs a DPIN only when the LLP becomes a public-interest entity or obtains a bank loan.

Answer: A — Every designated partner must obtain a DPIN from the Central Government, and the relevant provisions of Sections 153 to 159 of the Companies Act, 2013 apply mutatis mutandis.

Explanation. Section 7(6) requires every designated partner of an LLP to obtain a Designated Partner Identification Number from the Central Government. It also applies Sections 153 to 159 of the Companies Act, 2013 mutatis mutandis for this purpose. The requirement applies to each designated partner and is not replaced by the LLP's own registration number or by naming the person in the LLP Agreement. The primary distractor confuses entity identification with individual identification.

Where it goes wrong. Confusing the LLP's registration number with the individual DPIN required for each designated partner.

Authority. Section 7(6) of the Limited Liability Partnership Act, 2008; Sections 153 to 159 of the Companies Act, 2013, as applied mutatis mutandis

Question 25 · 2 marks · Chapter 12: The Limited Liability Partnership Act, 2008 · medium

Scenario. Two subscribers have signed the incorporation document of a proposed LLP. The required prescribed statement and applicable fees have also been submitted to the Registrar, and the Registrar is satisfied that the statutory filing requirements have been complied with. The promoters seek to know the period within which the Registrar should register the incorporation document and issue the certificate, assuming the requirement concerning the subscribing persons has also been complied with.

Two subscribers have signed the incorporation document of a proposed LLP. The required prescribed statement and applicable fees have also been submitted to the Registrar, and the Registrar is satisfied that the statutory filing requirements have been complied with. The promoters seek to know the period within which the Registrar should register the incorporation document and issue the certificate, assuming the requirement concerning the subscribing persons has also been complied with.

1. The Registrar must issue the certificate within 7 days from the date of submission of the incorporation document.
2. The Registrar must register the incorporation document and issue the certificate within 14 days, subject to the statutory conditions. (correct answer)
3. The Registrar must issue the certificate within 30 days after obtaining approval from the Central Government.
4. The Registrar may issue the certificate at any time because the LLP Act does not prescribe a registration period.

Answer: B — The Registrar must register the incorporation document and issue the certificate within 14 days, subject to the statutory conditions.

Explanation. Under Section 12(1), once the requirements under Section 11(1)(b) and (c) have been complied with, the Registrar is required to register the incorporation document and issue the certificate within 14 days, unless the requirement under Section 11(1)(a) has not been complied with. Section 12(2) permits the Registrar to accept the prescribed statement as sufficient evidence of compliance with the latter requirement. The primary distractor substitutes an unsupported 30-day period.

Where it goes wrong. Confusing the Registrar's 14-day incorporation period with the separate 30-day deadlines applicable to other LLP compliances.

Authority. Section 11(1) of the Limited Liability Partnership Act, 2008; Section 12(1) of the Limited Liability Partnership Act, 2008; Section 12(2) of the Limited Liability Partnership Act, 2008