## Characteristics of an LLP

The LLP enjoys 15 distinguishing features. Study them as 'who/what is the LLP' rather than as a memory list — the exam often tests one in a 4-mark MCQ form.

### 1. Body corporate (Section 3)

An LLP is a body corporate formed and incorporated under the LLP Act. It is a legal entity separate from its partners.

### 2. Perpetual succession

The LLP continues to exist regardless of changes in partners. Death, insanity, retirement or insolvency of a partner does not affect the LLP. It can contract and hold property in its own name.

### 3. Separate legal entity

The LLP is liable to the full extent of its assets, but partners are liable only to the extent of their agreed contribution. Creditors of the LLP are creditors of the LLP alone — they cannot pursue partners personally (in the ordinary case).

### 4. No mutual agency

A partner is not liable for the unauthorised or independent actions of another partner. Each partner is an agent of the LLP, but not of fellow partners — unlike an Indian Partnership, where mutual agency is the very foundation.

### 5. LLP Agreement

Mutual rights and duties of partners are governed by the LLP Agreement. If there is no agreement (or on a matter the agreement is silent), the First Schedule of the LLP Act fills the gap by default.

### 6. Artificial legal person

The LLP is invisible, intangible, immortal — created by law and dissolvable only by law. It can do everything a natural person can — except be jailed, take an oath, marry, divorce or practise a learned profession.

### 7. Common seal (Section 14(c))

An LLP may have a common seal — it is not mandatory. If kept, the seal must be in the custody of a responsible official and affixed in the presence of at least 2 designated partners.

### 8. Limited liability (Section 26)

Every partner is an agent of the LLP for its business, but not of other partners. Partners' liability is limited to their agreed contribution.

### 9. Management of business

All partners are entitled to manage the business, but only designated partners are responsible for legal compliance.

### 10. Number of partners

Minimum 2 partners (no maximum cap).
At least 2 designated partners who must be individuals.
At least 1 designated partner must be resident in India.

### 11. Business for profit only

LLP can be formed only to carry on a lawful business with a view to earn profit — NOT for charitable or non-economic purposes.

Business [Sec. 2(e)] — includes every trade, profession, service and occupation except activities excluded by the Central Government by notification.

### 12. Investigation

The Central Government has powers to investigate the affairs of an LLP by appointing a competent authority.

### 13. Compromise / Arrangement / Merger

Any compromise, arrangement, merger or amalgamation of LLPs must follow the provisions of the LLP Act, 2008.

### 14. Conversion into LLP

A firm, a private company, or an unlisted public company can be converted into an LLP per the LLP Act (governed by 2nd, 3rd and 4th Schedules respectively).

### 15. E-filing of documents

All forms/applications/documents must be filed in electronic form on www.mca.gov.in and authenticated by a digital signature of a partner / designated partner.

Worked example

### Example 1

Q. Mr. A, partner in XYZ LLP, signs a personal guarantee in his individual name. Mr. B, his co-partner, is sued for the default. Is B liable?

A. No. Owing to the 'no mutual agency' rule under Section 26, B cannot be held liable for A's independent or unauthorised acts. A acted as agent of the LLP at best — not of B.

### Example 2

Q. An LLP has 2 partners. One partner dies. Does the LLP automatically dissolve?

A. No — owing to perpetual succession, the LLP continues. However, if the number of partners falls below 2 and remains so for more than 6 months, the sole partner can be made personally liable (under Section 6(2) of the LLP Act).

⚠️ Common exam mistakes

Confusing the requirement for designated partners: it is at least 2, both individuals, with at least 1 resident in India — not at least 1.
Treating a common seal as mandatory — it is optional after the 2015 amendment trend.
Believing partners are agents of one another — they are only agents of the LLP.

Bare-Act text Section 3 · Limited Liability Partnership Act, 2008 · click to expand

(1) A limited liability partnership is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners. (2) A limited liability partnership shall have perpetual succession. (3) Any change in the partners of a limited liability partnership shall not affect the existence, rights or liabilities of the limited liability partnership.

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Characteristics of an LLP (Section 3 and allied provisions)

Worked example

⚠️ Common exam mistakes