# Characteristics of LLP

An LLP combines features of a company and a partnership. The key characteristics are:

#	Characteristic	Explanation
(i)	Body Corporate	LLP is a body corporate by statute
(ii)	Perpetual Succession	Death/insolvency/retirement of partners does not affect existence
(iii)	Separate Legal Entity	Distinct from its partners
(iv)	Partners Manage	Partners are entitled to manage the business
(v)	Artificial Legal Person	Created and recognised by law
(vi)	Limited Liability	Liability of partners is limited to their agreed contribution; LLP itself is liable to the full extent of its assets
(vii)	For Profit Only	LLP cannot be formed for charitable purposes
(viii)	Mutual Rights & Duties	Governed by LLP Agreement; in absence — by the First Schedule
(ix)	Mutual Agency	NO partner is liable for unauthorized acts of other partners
(x)	Authentication	Documents to be filed are authenticated by a partner or DP
(xi)	CG Investigation	CG can investigate the affairs of an LLP
(xii)	Common Seal (Optional)	If LLP decides to have one — kept with a responsible official and affixed in presence of at least 2 DPs

## Special Note on Terminology

Words not defined in the LLP Act but defined in the Companies Act shall have the meaning assigned in the Companies Act.

Worked example

### Example 1

Q: Two friends wish to form an LLP for running a charitable hospital. Is it permissible?

A: No. An LLP can be formed only for carrying on a lawful business with a view to profit. It CANNOT be formed for charitable purposes. They may instead consider a Section 8 company or a Trust.

### Example 2

Q: Mr. P, a partner of XYZ LLP, without authority enters into a contract on behalf of LLP that turns sour. Are other partners personally liable?

A: No. Owing to the principle of mutual agency, no partner is personally liable for the unauthorized acts of other partners.

### Example 3

Q: XYZ LLP wants to affix its common seal on a document. Is the common seal mandatory?

A: No. The common seal is OPTIONAL ('if LLP decides to have'). If it has one, it must be kept with a responsible official and affixed in the presence of at least 2 DPs.

⚠️ Common exam mistakes

Believing common seal is mandatory for LLPs — it is optional.
Stating LLP can be formed for charitable purposes — it cannot; only for profit.
Forgetting that in absence of LLP Agreement, the First Schedule governs mutual rights and duties.
Confusing mutual agency principle — partners are bound for authorized acts of co-partners, not for unauthorized acts.

Reference:

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