The statement accurately captures a defining characteristic of a Limited Liability Partnership (LLP), distinguishing it significantly from a traditional partnership. The LLP structure, governed by the Limited Liability Partnership Act, 2008 in India, combines the flexibility of a partnership with the advantages of limited liability of a company.

Agency Relationship in an LLP:

In a traditional partnership, every partner is an agent of the firm and also an agent of every other partner. This means that the act of one partner, within the scope of the firm's business, binds the firm and all other partners, making them jointly and severally liable.

However, in an LLP:

• Partner as Agent of the LLP: Section 26 of the LLP Act, 2008, states that every partner is an agent of the LLP for the purpose of the business of the LLP. This means that any act or omission of a partner in the course of the LLP's business, or with its authority, binds the LLP.
• Partner NOT an Agent of Other Partners: Crucially, the same section clarifies that a partner is not an agent of other partners. This is a fundamental departure from traditional partnerships. The actions of one partner do not automatically create liability for other individual partners. This separation of agency is central to the concept of limited liability for partners.

Extent of Liability of LLP and its Partners:

1. Liability of the LLP (The Entity):

• Separate Legal Entity: An LLP is a body corporate and a legal entity separate from its partners. It can sue and be sued in its own name, hold property, and has perpetual succession.
• Full Liability for its Debts and Obligations: The LLP itself is fully liable for its debts and obligations. Any liability arising from the business of the LLP, including contracts, torts, or statutory obligations, is borne by the LLP's assets. This means that creditors can only pursue the assets of the LLP, not the personal assets of its partners (except in specific circumstances).
• Liability for Partner's Acts: The LLP is liable for the acts of its partners if those acts are performed in the course of the LLP's business or with its authority. This is consistent with the partner being an agent of the LLP.

2. Liability of the Partners:

• Limited Liability: The most significant feature for partners is their limited liability. A partner's liability is generally limited to their agreed contribution to the LLP. This means their personal assets are protected from the debts and liabilities of the LLP.
• No Personal Liability for Other Partner's Wrongful Acts: A partner is not personally liable for the wrongful acts or omissions of any other partner, unless they were directly involved in the wrongful act or had knowledge of it and failed to act. This reinforces the 'not an agent of other partners' principle.
• Unlimited Liability in Specific Cases (Exceptions to Limited Liability):
  • Fraudulent Conduct (Section 30): If a partner (or the LLP) carries on business with the intent to defraud creditors or for any fraudulent purpose, the liability of the LLP and the partners involved in such fraudulent activity can become unlimited. The court may hold such partners personally liable for all or any of the debts or other liabilities of the LLP.
  • Wrongful Act/Omission (Section 28): While a partner is generally not liable for the acts of other partners, they remain personally liable for their own wrongful acts or omissions. If a partner commits professional negligence or a tort, they are personally liable for that act, though the LLP may also be vicariously liable.
  • Holding Out (Section 29): If a person, by words spoken or written or by conduct, represents themselves, or knowingly permits themselves to be represented, as a partner in an LLP, they are liable to any person who has given credit to the LLP on the faith of any such representation.
  • Non-compliance with Statutory Provisions: Failure to comply with certain statutory obligations (e.g., filing annual returns, maintaining proper accounts) can lead to penalties or even unlimited liability for designated partners.

Conclusion:

The LLP structure provides a robust framework where the entity itself bears full liability for its business operations, while individual partners enjoy limited liability, protecting their personal assets. The clear distinction in agency – a partner being an agent of the LLP but not of other partners – is fundamental to this limited liability. However, this protection is not absolute and can be pierced in cases of fraud or a partner's own wrongful conduct, ensuring accountability and preventing abuse of the limited liability privilege.