SWIFTSCANS FOR

CA FOUNDATION
JUNE’ 24

Dear Students. Swiftscans – CA foundation

The swiftscans contain all the
questions of Limited Liability Partnership, 2008
 RTP - May’ 18 to May’ 24.

 Question papers - May’ 18 -

Dec’ 23.

 Mock test papers

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 What do you mean by Limited Liability Partnership (LLP)? What are the
advantages for forming a LLP for doing business? (RTP May’ 18)/ (MT Oct’
18)

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 organising 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.
Advantages of LLP form:
1. LLP is organized and operates on the basis of an agreement.
2. It provides flexibility without imposing detailed legal and procedural requirements
3. It enables professional/technical expertise and initiative to combine with financial risk
taking capacity in an innovative and efficient manner.
4. It is easy to form
5. In LLP form, all partners enjoy limited liability
6. Flexible capital structure is there in this form
7. It is easy to dissolve

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 List the differences between the Limited Liability Partnership and the Limited
Liability Company. (RTP May’ 18)/ (MT Aug’ 18)/ (MT Mar’ 19)/ (MT)
OR
"A LLP (Limited Liability Partnership) is a type of partnership in which
participants' liability is fixed to the amount of money they invest whereas a LLC
(Limited Liability Private/Public Company) is a tightly held business entity that
incorporates the qualities of a corporation and a partnership". In line of above
statement clearly elaborate the difference between LLP and LLC. (Dec’ 22)/ (MT)

Limited liability Partnership Company

The LLP Act, 2008. The Companies Act, 2013.
The persons who The persons who invest the
contribute to LLP are money in the shares are
known as partners of the known as members of the
LLP. company.
The internal governance The internal governance
structure of a LLP is structure of a company is
governed by contract regulated by statute (i.e.,
agreement between the Companies Act, 2013).
partners.
The internal governance Name of the public
structure of a LLP is company to contain the
governed by contract word “limited” and Pvt. Co.
agreement between the to contain the word “Private
partners. limited” as suffix.
Minimum – 2 members Private company:
Maximum – No such limit Minimum – 2 members
on the members in the Maximum 200 members
Act. The members of the Public company:
LLP can be individuals/or Minimum – 7 members
body corporate through Maximum – No such limit
the nominees. on the members. Members can
be
organizations, trusts,
another business form or
individuals.

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Limited liability Partnership Company
Liability of a partners is Liability of a member is
limited to the extent of limited to the amount
agreed contribution in unpaid on the shares held
case of intention is fraud. by them.
The business of the The affairs of the company
company managed by are managed by board of
the partners including the directors elected by the
designated partners shareholders.
authorized in the
agreement.
Minimum 2 designated Minimum directors
partners. Pvt. Co. – 2 directors
Public co. – 3 directors

Page 4
 What is Small Limited Liability Partnership as per Limited Liability Partnership
(Amendment) Act, 2021? (MT)/ (RTP June’ 23)

S
“ mall Limited Liability Partnership [Section 2(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.

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 State the essential elements to incorporate a LLP. (RTP Nov’ 18)/ (May’ 18)
OR
Explain the essential elements to incorporate a Limited Liability Partnership and
the steps involved therein under the LLP Act, 2008. (Nov’ 18)/ (May’ 22)

Under the LLP Act, 2008, the following elements are very essential to form a LLP
in India:
i. To complete and submit incorporation document in the form prescribed with the
Registrar electronically;
ii. To have at least two partners for incorporation of LLP [Individual or body corporate];
iii. To have registered office in India to which all communications will be made and
received;
iv. To appoint minimum two individuals as designated partners who will be responsible
for number of duties including doing of all acts, matters and things as are required to
be done by the LLP. Atleast one of them should be resident in India.
v. A person or nominee of body corporate intending to be appointed as designated
partner of LLP should hold a Designated Partner Identification Number (DPIN)
allotted by MCA.
vi. To execute a partnership agreement between the partners inter se or between the LLP
and its partners. In the absence of any agreement the provisions as s et out in First
Schedule of LLP Act, 2008 will be applied.
vii. LLP Name.

Steps to incorporate LLP:

1. 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.
2. Incorporate LLP:
 After reserving a name, user has to file e- Form 2 for 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
3. 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.

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 Differentiate between an LLP and a partnership firm? (RTP Nov’ 18)
OR
A and 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 and other legal formalities.
(RTP Dec’ 21)/ (RTP June’ 24)

Limited liability Partnership Partnership

The LLP Act, 2008. The Indian Partnership Act,
1932.
It is a body corporate. It is not a body corporate.
It is a legal entity separate It is a group of persons with no
from its members. separate legal entity.
Creation It is created by a legal It is created by an agreement
process called registration between the partners.
under the LLP Act, 2008.
Registration is mandatory. Registration is voluntary.
LLP can sue and be sued Only
in its own name. the registered partnership firm
can sue the third parties.
The death, insanity, The death, insanity, retirement
retirement or insolvency of or insolvency of the partner(s)
the partner(s) does not may affect its existence. It has
affect its existence of LLP. no perpetual succession.
Members may join or
leave but its existence
continues forever.
Name of the LLP to contain No guidelines. The partners
the word limited liability can have any name as per
partners (LLP) as suffix. their choice.
Liability of each partner Liability of each partner is
limited to the extent to unlimited. It can be extended
agreed contribution except upto the personal assets of the
in case of willful fraud. partners.
Each partner can bind the Each partner can bind the firm
LLP by his own acts but as well as other partners by his
not the other partners. own acts.

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Limited liability Partnership Partnership
At least two designated There is no provision for such
partners and atleast one partners under the Indian
of them shall be resident partnership Act, 1932.
in India.
It may have its common There is no such concept in
seal as its official partnership
signatures.
Only designated partners All partners are responsible for
are responsible for all the all the compliances and
compliances and penalties under the Act.
penalties under this Act.
LLP is required to file: Partnership firm is not required
(i) Annual statement of to file any annual document
accounts with the registrar of firms.
(ii) Statement of
solvency
(iii) Annual return with
the registration of
LLP every year.
Foreign nationals can Foreign nationals cannot
become a partner in a become a partner in a
LLP. partnership firm.
Minor as partner Minor cannot be Minor can be admitted to the
admitted benefits of the partnership with
to the benefits of LLP. the prior consent of the
existing partners.

Page 8
 Explain the incorporation by registration of a Limited Liability Partnership and its
essential elements under the LLP Act, 2008. (May’ 22)

Incorporation by registration (Section 12 of LLP Act, 2008): #

1. When the requirements of section 11 have been complied with, the Registrar shall
retain the incorporation document and 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 certificate issued shall be signed by the Registrar and authenticated by his official
seal.
3. The certificate shall be conclusive evidence that the LLP is incorporated by the name
specified therein.
Essential elements to incorporate Limited Liability Partnership (LLP): Under the LLP Act,
2008, the following elements are very essential to form a LLP in India:
i. To complete and submit incorporation document in the form prescribed with the
Registrar electronically;
ii. To have at least two partners for incorporation of LLP [Individual or body corporate];
iii. To have registered office in India to which all communications will be made and
received;
iv. To appoint minimum two individuals as designated partners who will be responsible
for number of duties including doing of all acts, matters and things as are required to
be done by the LLP. Atleast one of them should be resident in India.
v. A person or nominee of body corporate intending to be appointed as designated
partner of LLP should hold a Designated Partner Identification Number (DPIN)
allotted by MCA.
vi. To execute a partnership agreement between the partners inter se or between the LLP
and its partners. In the absence of any agreement the provisions as s et out in First
Schedule of LLP Act, 2008 will be applied.
vii. LLP Name.

Page 9
 What is the meaning of the Limited Liability Partnership? State the various
characteristics of it? (RTP May’ 19)

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 organising 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.

Characteristic/Salient Features of LLP

1. LLP is a 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 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 of changes in
partners. 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, 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.

Page 10
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 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.
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. Such contribution
may be of tangible or intangible nature or both.
9. Management of Business: The partners in the LLP are entitled to manage 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 agreements 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 as place of business within India”. Foreign LLP can become a partner in
an Indian LLP.

Page 11
 "LLP is an alternative corporate business form that gives the benefits of limited
liability of a company and the flexibility of a partnership". Explain. (Nov’ 19)/
(July’ 21)/ (MT)/ (RTP May’ 22)/ (MT)/ (MT)/ (MT)

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 of the LLP Act, 2008). 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.

Page 12
 Who are the individuals which shall not be capable of becoming a partner of a
Limited Liability Partnership? (RTP Nov’ 19)

As per section 5 of the Limited Liability Partnership, 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—
i. he has been found to be of unsound mind by a Court of competent jurisdiction and
the finding is in force;
ii. he is an undischarged insolvent; or
iii. he has applied to be adjudicated as an insolvent and his application is pending.

Page 13
 What are the effects of registration of LLP? (RTP Nov’ 19)

U/s 14 of the Limited Liability Act, 2008 on registration, a LLP shall, by its name,
be capable of—
i. suing and being sued;
ii. acquiring, owning, holding and developing or disposing of property, whether movable
or immovable, tangible or intangible;
iii. having a common seal, if it decides to have one; and
iv. doing and suffering such other acts and things as bodies corporate may lawfully do and
suffer.

Page 14
 What do you mean by Designated Partner? Whether it is mandatory to appoint
Designated partner in a LLP? (MT Nov’ 19)/ (RTP May’ 21)/ (MT)/ (MT)

According to section 7:
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 182 days during the
immediately preceding one year.

Page 15
 What is the procedure for changing the name of Limited Liability Partnership
(LLP) on the order of the Central Government under the LLP Act, 2008? (RTP
May’ 20)

As per section 17 of LLP Act, 2008 where the Central Government is satisfied that
a LLP has been registered under a name which —
i. Is undesirable; or
ii. is identical with or too nearly resembles the name of any other LLP or body Corporate
or a registered trademark or other name as to be likely to be mistaken for it,
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.
Any LLP which fails to comply with a direction shall be punishable with fine which shall not
be less than 10,000 but which may extend to 5 Lakhs. The designated partner of such LLP
shall be punishable with fine which shall not be less than 10,000 but which may extend to 1
Lakh.

Page 16
 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. (Dec’ 21)

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

A document may be served on an 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.

An 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.

If the LLP contravenes any provisions of this section, the LLP and its every partner shall be
punishable with fine which shall not be less than 2000, but which may extend to 25000.

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