Corporate and Business Law (Global) · Partnerships

Limited Partnerships and LLPs for ACCA LW

Updated 11 October 2026 · Fact-checked

A limited partnership has at least one general partner with unlimited liability and one or more limited partners whose liability is capped at their contribution, provided they stay out of management. An LLP is a separate legal person registered with the state, and its members have limited liability and can manage it.

Understand Limited Partnerships and LLPs

An ordinary partnership is not a separate legal person in most legal systems, and each partner is personally liable for the firm's debts. Limited partnerships and LLPs exist to give some partners protection from that risk. In ACCA LW (Global), you answer on general principles, not on one country's statute. Details vary by jurisdiction, so focus on the common features.

A limited partnership has two kinds of partner. The general partner (at least one) manages the business and has unlimited personal liability. The limited partner invests capital and has liability limited to the amount contributed or agreed to be contributed. It must be registered with the state registrar. Without registration, the firm is normally treated as an ordinary partnership with unlimited liability for all.

The key rule for limited partners is the link between protection and management. A limited partner who takes part in managing the business risks losing limited liability. Typically, the loss applies to dealings where the third party reasonably believed the partner was a general partner. Limited partners may usually still advise, inspect the books and vote on certain fundamental matters, without losing protection. Limited partners also generally cannot withdraw their capital while the partnership continues, because creditors rely on it.

A limited liability partnership (LLP) is a hybrid. It is formed by registration and is a separate legal person, distinct from its members. It can own property, make contracts and sue or be sued in its own name. Members have limited liability, usually capped at their agreed contribution, yet all members can take part in management. Usually at least two members are needed. The LLP files documents and accounts with the registrar, so it is more transparent than an ordinary partnership.

The LLP agreement governs the relationship between members. If it is silent, default rules in the governing law apply. Members are normally agents of the LLP, not of each other. A member remains personally liable for their own wrongful acts or negligence, so limited liability does not remove that risk.

Key formulas to remember

Limited partnership structure: At least 1 general partner (unlimited liability) + at least 1 limited partner (liability capped at contribution); Both types must exist. A firm with only limited partners cannot be a limited partnership.
Limited partner's protection rule: Limited liability = contribution only, provided no involvement in management; Taking part in management can expose the limited partner to unlimited liability, usually towards those who relied on that conduct.
Registration requirement: Limited partnership or LLP status = registration with the registrar; Failure to register in a limited partnership usually means all partners are treated as general partners.
LLP legal status: LLP = separate legal person + limited liability for members + member participation in management; This combination is the main difference from a limited partnership.
Personal fault rule: Member's own wrongful act or negligence = personal liability of that member; Limited liability protects against the LLP's debts, not against your own tort.

How to solve Limited Partnerships and LLPs questions

Use this sequence for any scenario or objective question on limited partnerships and LLPs.

1Identify the entity: ordinary partnership, limited partnership or LLP. Check the wording for words like registered, limited partner or member.
2Check registration. If the entity was never registered, treat it as an ordinary partnership with unlimited liability.
3For a limited partnership, list who is a general partner and who is a limited partner.
4Test the limited partner's conduct. Did they manage the business or act as if they were a general partner? Did a third party rely on that?
5For an LLP, remember it is a separate person. The LLP is liable first, and members are liable only up to their contribution.
6Check for personal fault, such as negligence or fraud by an individual member.
7State the conclusion in one sentence and give the rule that supports it.

Quickest way: Three-question shortcut

When to use it: Use this for Section A and Section B objective questions where time is short.

Ask: is it registered? If not, unlimited liability for everyone.
Ask: who is the person in the question? A general partner is always unlimited. A limited partner is capped unless managing. An LLP member is capped unless personally at fault.
Ask: which feature is tested? Separate legal person points to an LLP. Need for a general partner points to a limited partnership. Then eliminate options that mix the two.

Common mistakes in Limited Partnerships and LLPs

Saying limited partners can never lose limited liability.
Students remember the word limited and ignore the management rule.
Fix: Link protection to non-participation in management. If a limited partner manages, liability may become unlimited.
Saying a limited partnership has no unlimited liability.
Students focus on the limited partners only.
Fix: Remember the general partner always has unlimited liability. The structure needs at least one.
Treating an LLP like a limited partnership with limited partners and general partners.
The names sound alike.
Fix: An LLP has members only, with no general and limited split. All members have limited liability and can manage.
Forgetting that an LLP is a separate legal person.
Students think of it as a type of partnership and apply partnership rules.
Fix: State that the LLP contracts, owns property and is sued in its own name.
Ignoring registration.
Scenarios mention registration only briefly.
Fix: Always check registration first. It decides whether limited liability exists at all.
Saying LLP members are protected from their own negligence.
Students over-apply limited liability.
Fix: Limited liability covers the LLP's debts. A member remains liable for their own wrongful acts.

Worked examples

Example 1

Asha is a limited partner in a registered limited partnership. She contributed $50,000. She begins to negotiate contracts for the firm with suppliers, who believe she is a general partner. The firm later cannot pay a $200,000 debt owed to one of these suppliers. Advise on Asha's liability.

Show the solution

The firm is registered, so limited partner status was valid at the start.
Asha's protection depends on her not taking part in management.
She negotiated contracts and the suppliers believed she was a general partner, so she took part in management.
A third party relied on her conduct, so she can lose limited liability for that debt.
She may therefore be liable beyond her $50,000 contribution, up to the full $200,000 debt, to that supplier.

Answer: Asha is likely to lose limited liability towards the supplier who relied on her conduct, and may be personally liable for the whole $200,000 debt, not just her $50,000 contribution.

Example 2

Ben and Carla are members of a registered LLP. The LLP owes a bank $300,000 and has only $100,000 in assets. Each member contributed $20,000. Ben was also negligent in advising a client of the LLP, causing the client a loss. Explain the liability of the members for the bank debt and for the client's loss.

Show the solution

The LLP is a separate legal person, so the bank debt is the LLP's debt.
The LLP's assets of $100,000 are available first to the bank.
Members have limited liability, so Ben and Carla are not personally liable for the remaining $200,000, apart from losing their contributions, which are already in the LLP.
For the client's loss, Ben's own negligence is a personal wrong, so limited liability does not protect him from a claim against him personally.
Carla is not personally liable for Ben's negligence merely because she is a member.

Answer: Neither member is personally liable for the bank's unpaid balance; the bank can only claim against the LLP's assets. Ben may be personally liable for the client's loss because of his own negligence. Carla is not.

Exam tips

Look for the trigger words general partner, limited partner and member. They tell you which entity is being tested.
In objective questions, watch for options that give limited partners management rights with no consequences. These are usually wrong.
In multi-task questions, answer the registration point first, then liability, then management.
Use the phrase separate legal person for an LLP and say what follows: it contracts and is sued in its own name.
Remember that rules differ by country. Choose the general principle, not a detail from one statute.

Practice questions from Partnerships

Limited Partnerships and LLPs in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Limited Partnerships and LLPs: frequently asked questions

How does a limited partner lose limited liability?

Mainly by taking part in managing the business, especially where a third party reasonably believed they were a general partner. Failure to register the partnership can also remove protection for all partners. The exact test depends on the governing law.

What is the difference between an LLP and a limited partnership?

An LLP is a separate legal person whose members all have limited liability and can manage. A limited partnership needs at least one general partner with unlimited liability, and limited partners must stay out of management. In most systems the limited partnership is not a separate legal person, though this varies.

Do LLP members have unlimited liability for anything?

Members are not liable for the LLP's debts beyond their agreed contribution. They stay liable for their own wrongful acts, such as negligence or fraud. They may also face personal liability under other laws, for example for breaching duties.

How is an LLP formed?

By registering with the state registrar, usually with a document naming the members and the business, and often with a registered office. Typically at least two members are needed. The LLP exists as a legal person from registration.