Five close friends decided to form a Limited Liability Partnership firm 6 'EDUDED LLP' for educating poor children as non-profit organization. They were Mr. A (Non-resident), Mr. B (Non-Resident), Ms. C (resident), Ms. D (resident) and Ms. E (resident). It was decided that Mr. A and Mr. B will be appointed as designated partners.
With reference to provisions of the Limited Liability Partnership Act 2008, answer each of the following:
i) Whether EDUDED LLP can be formed for above purpose?
ii) Whether Mr. A and Mr. B can be appointed as designated partners in EDUDED LLP?

Question

Accepted Answer

(i) According to Section 11 of the Limited Liability Partnership Act, 2008, the essential requirement of forming LLP is carrying on a lawful business with a view to earn profit. EDUDED LLP cannot be formed for educating poor children as a non-profit organization.
In view of the above, a LLP cannot be formed for charitable or non-economic purpose.
(ii) Designated Partners (Section 7 of the Limited Liability Partnership Act, 2008):
Every LLP shall have at least two designated partners who are individuals and at least one of them shall be a Resident in India.
For the purpose of this section, the term Resident in India means a person who has stayed in India for a period of not less than 120 days during the financial year.
As EDUDED LLP cannot be formed because its purpose is for non-profit organization, the question of appointing Mr. A and Mr. B as designated partners does not arise.
Note: However, if the EDUDED LLP can be formed, Mr. A and Mr. B cannot be appointed as designated partners in EDUDED LLP as both are Non-Resident and the condition that at least one designated partner must be a resident in India is not fulfilled. Therefore, one designated partner must be either Ms. C or Ms. D or Ms. E as all three of them are resident.

Question Scenario

Suggested Answer

1. Provisions of the Act / Applicable Law

2. Analysis & Application of Facts

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