Question 4 (a)
LLP as a hybrid business structure; LLP and partnership firm
9 marks
- Time to write
- About 18 minutes
- Notes
- Crux notes
Question
Question 4 (a) · 9 marks"LLP is a hybrid business structure" Do you agree? Differentiate an LLP from a Partnership firm.
Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- Is…?Differentiate…2 asks, each with its own marks below. Answer both.
- agreeA statement to judge: take a stand on it in your first line, and come back to it at the end.
Write it in this order
- Read; underline the asks; jot your points 1 min
- 1 LLP as a hybrid structure 3 marks 5 min
- 2 Differences 6 marks 11 min
- Check: every ask answered, key terms underlined 1 min
Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks.
Try it first. About 18 minutes for 9 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Do you agree? Yes. Think of three architects who want to practise together. As a partnership firm, each of them would risk his house and savings for a mistake made by another; as a company, they would face board meetings, share capital and heavy filings. The LLP sits between the two. From the company side it takes incorporation: it is a body corporate, a legal person separate from its partners, and it alone answers for its debts out of its own assets, each partner's risk being limited to what he agreed to contribute. From the partnership side it takes flexibility: the partners settle their rights, duties and management among themselves by agreement, and compliance costs stay low. Because it combines features of both forms, it is fairly called a hybrid.
1The firm's debt reaches the house: the sofa and the TV ride away on the creditor's truck.
Partnership firmUnlimited, extending to the partners' personal assets.
2Under an LLP only the office desk goes; the couple watch from their own gate, home untouched.
LLPLimited to the agreed contribution, except in wilful fraud.
Differences: how an LLP differs from a partnership firm:
| Basis | LLP | Partnership firm |
|---|---|---|
| Partners' personal risk | Limited to the agreed contribution; unlimited for fraud (s. 30), and each partner answers for his own wrongful acts (s. 28(2)) | Unlimited: personal assets can be reached |
| Separate existence | A body corporate distinct from its partners | No existence apart from the partners |
| Effect of partners leaving | The LLP carries on unaffected | A change of partners may end or reconstitute the firm |
| Acts of one partner | Bind the LLP, but not the other partners personally | Bind the firm and every other partner |
| Who looks after compliance | The designated partners (at least two, one resident in India) | Every partner |
| Annual filings with the Registrar | Yearly statement of account and solvency, and an annual return | No annual document to file |
| Name | Must end with "limited liability partnership" or "LLP" | Any lawful name |
| Common seal | May adopt one | Has none |
Where the 9 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | LLP as a hybrid structure | 3 |
| 2 | Differences | 6 |
| Total | 9 |
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