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CA FOUNDATION – BUSINESS LAW
DEC. 2021 EXAM
TODAY TARGET – 34 MARK’s
----- Complete Concept Revision With Question & Answer
------ Important Key Aspects
------ Important Questions – For 34 MARK’S
------ CASE STUDY Based Questions
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THE LIMITED LIABILITY PARTNERSHIP ACT, 2008 – 5 MARK’S
MEANING AND CHARACTERISTICS OF LLP:
Question 1.
Explain the Meaning of LLP. State its Characteristics?
Answer
Meaning of LLP
A LLP is a new form of legal business entity with limited liability. It is an alternative
corporate business vehicle that not only gives the benefits of limited liability at low
compliance cost but allows its partners the flexibility of 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. 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.
Characteristics / Essentials of LLP
1) LLP is a body corporate: LLP is a body corporate formed and incorporated under this
Act and is a legal entity separate from that of its partners.
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2) Perpetual Succession: 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.
3) Separate Legal Entity: LLP is a separate legal entity from its partners.
4) Mutual Agency: Further, no partner is liable on account of the un-authorized actions of
other partners.
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. In the absence of any such agreement, the mutual
rights and duties shall be governed by the provisions of the LLP Act, 2008.
6) Artificial Legal Person: A LLP is an artificial legal person because it is created by a legal
process and is clothed with all rights of an individual.
7) Common Seal: LLP may have a common seal, if it decides to have one. Thus, it is not
mandatory for a LLP to have a common seal.
8) Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the
agent of the LLP, but not of other partners (Section. 26). The liability of the partners will be
limited to their agreed contribution in the LLP
9) Management of Business: 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) E-Filling of Documents: Every form or application of document required under the act
and rules, shall be filed in electronic form on the website www.mca.gov.in and
authenticated by a partner or designated partner of LLP by the use of electronic or digital
signature.
ADVANTAGES OF LLP:
Question 2.
What are the advantages of LLP form of business?
Answer
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
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7) It is easy to dissolve
Question 3.
"LLP is an alternative corporate business form that gives the benefits of limited
liability of a company and the flexibility of a partnership". Explain.
Answer
LLP is an alternative corporate business form that gives the benefits of limited liability of a
company and the flexibility of a partnership
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 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.
INCORPORATION OF LLP:
Question 4.
What are the essential elements to incorporate LLP? Also state the steps to
incorporate LLP?
Answer
Under the LLP Act, 2008, the following elements are very essential to form a LLP in India:
To complete and submit incorporation document in the form prescribed with the
Registrar electronically
To have at least two partners for incorporation of LLP
To have registered office in India to which all communications will be made and received
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
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
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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 set out in First Schedule of LLP Act, 2008
will be applied
LLP Name. The LLP cannot have the same name with any other LLP, Partnership Firm or
Company
To create a LLP proper formation documents must be led with the registrar along with
the necessary filing fees.
Steps to Incorporate LLP
1. Name Resevation
The first step to incorporate Limited Liability Partnership 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
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.
EFFECTS OF REGISTRATION OF LLP
Question 5.
What are the effects of registration of LLP?
Answer
Effect of registration (Section 14 of Limited Liability Partnership Act, 2008):
On registration, a LLP shall, by its name, be capable of—
1) suing and being sued;
2) acquiring, owning, holding and developing or disposing of property, whether movable or
immovable, tangible or intangible;
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CA FOUNDATION – BUSINESS LAW
DEC. 2021 EXAM
TODAY TARGET – 34 MARK’s
----- Complete Concept Revision With Question & Answer
------ Important Key Aspects
------ Important Questions – For 34 MARK’S
------ CASE STUDY Based Questions
IMPORTANT :-
1. Subscribe – ( CTC Classes ) for FREE CA Foundation Complete Course & REVISION.
2. Subscribe – ( CTC Classes 2.O) For Next Level
3. Join US on TELEGRAM – Search on Telegram – CTC Classes - For Free NOTES & Update ( 41,000+
Students Already Joined )
BEST Wishes – CTC Classes
THE LIMITED LIABILITY PARTNERSHIP ACT, 2008 – 5 MARK’S
MEANING AND CHARACTERISTICS OF LLP:
Question 1.
Explain the Meaning of LLP. State its Characteristics?
Answer
Meaning of LLP
A LLP is a new form of legal business entity with limited liability. It is an alternative
corporate business vehicle that not only gives the benefits of limited liability at low
compliance cost but allows its partners the flexibility of 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. 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.
Characteristics / Essentials of LLP
1) LLP is a body corporate: LLP is a body corporate formed and incorporated under this
Act and is a legal entity separate from that of its partners.
#Share With Someone who Need to See this #CAFoundation YouTube - CTC Classes Page 1
,For Free Video Lectures Search on YouTube – CTC Classes, For CA Foundation Dec 2021
2) Perpetual Succession: 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.
3) Separate Legal Entity: LLP is a separate legal entity from its partners.
4) Mutual Agency: Further, no partner is liable on account of the un-authorized actions of
other partners.
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. In the absence of any such agreement, the mutual
rights and duties shall be governed by the provisions of the LLP Act, 2008.
6) Artificial Legal Person: A LLP is an artificial legal person because it is created by a legal
process and is clothed with all rights of an individual.
7) Common Seal: LLP may have a common seal, if it decides to have one. Thus, it is not
mandatory for a LLP to have a common seal.
8) Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the
agent of the LLP, but not of other partners (Section. 26). The liability of the partners will be
limited to their agreed contribution in the LLP
9) Management of Business: 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) E-Filling of Documents: Every form or application of document required under the act
and rules, shall be filed in electronic form on the website www.mca.gov.in and
authenticated by a partner or designated partner of LLP by the use of electronic or digital
signature.
ADVANTAGES OF LLP:
Question 2.
What are the advantages of LLP form of business?
Answer
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
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,For Free Video Lectures Search on YouTube – CTC Classes, For CA Foundation Dec 2021
7) It is easy to dissolve
Question 3.
"LLP is an alternative corporate business form that gives the benefits of limited
liability of a company and the flexibility of a partnership". Explain.
Answer
LLP is an alternative corporate business form that gives the benefits of limited liability of a
company and the flexibility of a partnership
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 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.
INCORPORATION OF LLP:
Question 4.
What are the essential elements to incorporate LLP? Also state the steps to
incorporate LLP?
Answer
Under the LLP Act, 2008, the following elements are very essential to form a LLP in India:
To complete and submit incorporation document in the form prescribed with the
Registrar electronically
To have at least two partners for incorporation of LLP
To have registered office in India to which all communications will be made and received
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
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
#Share With Someone who Need to See this #CAFoundation YouTube - CTC Classes Page 3
, For Free Video Lectures Search on YouTube – CTC Classes, For CA Foundation Dec 2021
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 set out in First Schedule of LLP Act, 2008
will be applied
LLP Name. The LLP cannot have the same name with any other LLP, Partnership Firm or
Company
To create a LLP proper formation documents must be led with the registrar along with
the necessary filing fees.
Steps to Incorporate LLP
1. Name Resevation
The first step to incorporate Limited Liability Partnership 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
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.
EFFECTS OF REGISTRATION OF LLP
Question 5.
What are the effects of registration of LLP?
Answer
Effect of registration (Section 14 of Limited Liability Partnership Act, 2008):
On registration, a LLP shall, by its name, be capable of—
1) suing and being sued;
2) acquiring, owning, holding and developing or disposing of property, whether movable or
immovable, tangible or intangible;
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