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Liability of partners

Since an LLP is a separate legal entity, an obligation of the LLP whether arising out of a contract or otherwise, is solely the obligation of the LLP. The liabilities of LLP have to be met out of the property of the LLP only, and not that of the partners in normal course like it is possible in a traditional partnership.

Every partner of an LLP would be, for the purpose of the business of the LLP, an agent of the LLP but not of the other partners. Liability of partners shall be limited except in case of unauthorized acts, fraud and negligence. Even in that case, a partner shall not be personally liable for the wrongful acts or omission of any other partner.


For instance, if XYZ LLP has three partners, A, B and C, where A commits fraud upon a customer of the LLP business while executing a trade for the LLP with such a customer, A will be fully liable for any loss to the firm, and the customer is free to recover the legal claims against the firm arising out of A’s conduct from the funds and property of XYZ LLP and A’s personal assets too. However, the customer can not recover anything from the personal property of B or C. This is why this form of business is called a limited liability partnership.

Minimum number of partners in LLP

The Act provides for the minimum of two partners to carry on LLP. If at any time the number of partners of a limited liability partnership is reduced below two and the limited liability partnership carries on business for more than six months while the number is so reduced, the person, who is the only partner of the limited liability partnership during the time that it so carries on business after those six months and has the knowledge of the fact that it is carrying on business with him alone, shall be liable personally for the obligations of the limited liability partnership incurred during that period.

Similarities with Partnerships


i) Unlimited liability in certain circumstances – In certain circumstances such as his own unauthorized acts, fraud and negligence, a partner of an LLP may be liable to an unlimited extent and his personal assets become liable.


ABC LLP has four partners – E, F, G and H. Its paid-up capital is INR 5 lakhs. The LLP takes a loan of INR 10 lakhs from a lender for the purpose of buying some equipment for its operations, but F (a partner of the LLP) diverts the entire amount for his son’s education. The lender sues ABC LLP.

  • The LLP alongwith F will be jointly liable - The LLP will be liable up to the extent of its capital (i.e. INR 5 lakhs), but F will be liable to an unlimited extent, i.e. he will be liable to pay back the amount of INR 10 lakhs to the lender from his personal assets. However, the remaining partners of the LLP, i.e. E, G and H will not be liable at all.
  • If it is established that the loan, despite being taken in the name of the LLP, was taken without the knowledge or authority of the LLP, the LLP will not be held liable. Say, if according to the LLP Agreement a loan could only be taken with the consent of any 2 partners of the LLP, and the loan was actually taken by F without the consent of any other partner, then the LLP will not be liable. Only F will be personally liable to pay back the entire amount of INR 10 lakhs.

ii) Liability of persons who represent / allow themselves to be represented as partners

In a partnership, a person may be held liable for obligations of the firm as a partner, if he has either represented or let himself be projected to third parties as a partner of the firm. Such a person is known as a 'partner by holding out'. The LLP Act has applied this concept to LLPs as well. In the case of an LLP,
any person (not being a partner in any LLP), who by words spoken or written or by conduct, represents himself, or knowingly permits himself to be represented to be a partner in a LLP, will be liable to any person who has on the faith of any such representation either lend money/provided credit to, or did business with the LLP, whether the person representing himself or represented to be a partner does, or does not know that the representation has reached the person so giving credit.


Further, where any credit is received by the LLP as a result of such representation, the LLP shall, irrespective of the liability of the partner by holding out, be liable to the amount of credit received on the basis of such representation.

Documents available for public inspection (Online or at the office of Registrar)

The following documents/information will be available for inspection by any person:-

  • Incorporation document,
  • Names of partners and changes, if any, made therein,
  • Statement of Account and Solvency
  • Annual Return

The fees for such inspection of an LLP is Rs 50/- and fees for certified copy or extract of any document u/s. 36 shall be Rs. 5/- per page.


At present, public inspection of these documents can be done online on the MCA21 website as well, and payment can be made electronically. This service is compatible only with Internet Explorer browser.


Annual compliance

Every LLP would be required to file:
(i) An annual return in Form 11 with ROC within 60 days of the closure of financial year, and
(ii) A Statement of Accounts and Solvency in Form 8, within 7 months from the end of the financial year. The annual return will be available for public inspection on payment of prescribed fees to Registrar. Detailed annual compliance requirements are mentioned separately.


Maintenance of Accounts

The LLP shall be under an obligation to maintain annual accounts reflecting true and fair view of its state of affairs. A statement of accounts and solvency shall be filed by every LLP with the Registrar every year.



An LLP whose contribution exceeds Rs. 25 Lakh or the Limited Liability Partnership whose turnover exceeds Rs. 40 Lakh are required to get their accounts audited, annually, by any Chartered Accountant in practice.


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