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ACCA Applied Skills · Corporate and Business Law (Global) · Corporations and legal personality

Lena and Tomas run a business as a limited liability partnership (LLP) created under statute in their country, which gives LLPs separate legal personality. The LLP signs a supply contract and then fails to pay the supplier. Which statement is most accurate?

The LLP is the contracting party and is liable for the debt, and the members are not personally liable merely because they are members. Where statute gives an LLP separate legal personality, it contracts in its own name and members enjoy limited liability, unlike partners in a general partnership.

  1. AThe supplier can sue Lena and Tomas personally as if they were ordinary general partners, because an LLP has no legal personality
  2. BThe LLP is the contracting party and is liable, and the members are not personally liable for the contract debt merely by being membersCorrect
  3. COnly a court-appointed administrator can be sued, because an LLP cannot enter contracts in its own name

Explanation

Where statute gives an LLP separate legal personality, the LLP itself contracts, owns property and is liable for its debts. Members' liability is normally limited, so they are not personally liable for the contract merely by being members. The first option wrongly treats the LLP like a general partnership; the third has no basis in the stated facts.

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