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CS Executive · Setting Up of Business, Industrial and Labour Laws · Selection of Business Organization

Meera and her two friends plan a small consultancy in Pune. They want the owners' personal assets protected from the firm's business debts, but they also want a flexible internal arrangement set by agreement and minimal compliance. Which entity best matches these priorities?

A Limited Liability Partnership fits best. It is a separate legal entity that shields partners' personal assets from business debts, while its internal affairs are set by the LLP agreement and compliance is lighter than for a company. An ordinary partnership leaves partners personally liable without limit.

  1. AGeneral partnership firm
  2. BLimited Liability PartnershipCorrect
  3. CSole proprietorship
  4. DHindu Undivided Family business

Explanation

An LLP is a body corporate with limited liability for partners, and its internal management is governed largely by the LLP agreement. A general partnership gives flexibility but partners have unlimited liability, so it fails the key requirement. A sole proprietorship has one owner and unlimited liability.

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