Module: General Practice
Q123: Regarding the Limited Liability Partnership (LLP) Act, 2008 as a strategy for SME organization, consider the following statements:
An LLP is a separate legal entity distinct from its partners.
The liability of partners is limited to their agreed contribution in the LLP.
Every LLP must have at least two "Designated Partners," of whom both must be resident in India.
Which of the statements given above are correct?
The liability of partners is limited to their agreed contribution in the LLP.
Every LLP must have at least two "Designated Partners," of whom both must be resident in India.
Which of the statements given above are correct?
✅ Correct Answer: A
Statement 1 is correct because an LLP is a body corporate and a legal entity separate from its partners, possessing perpetual succession.
Statement 2 is correct because, as the name suggests, the liability of the partners is limited to their agreed contribution.
No partner is liable on account of the independent or unauthorized actions of other partners, which distinguishes it from a traditional partnership.
Statement 3 is incorrect because, while an LLP must have at least two Designated Partners, the requirement under the Act is that at least one (not both) of them must be a resident in India.
SMEs often choose the LLP structure over Private Limited Companies to reduce compliance burdens (such as no mandatory board meetings) while retaining limited liability protection.
Statement 2 is correct because, as the name suggests, the liability of the partners is limited to their agreed contribution.
No partner is liable on account of the independent or unauthorized actions of other partners, which distinguishes it from a traditional partnership.
Statement 3 is incorrect because, while an LLP must have at least two Designated Partners, the requirement under the Act is that at least one (not both) of them must be a resident in India.
SMEs often choose the LLP structure over Private Limited Companies to reduce compliance burdens (such as no mandatory board meetings) while retaining limited liability protection.