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

Three professionals in Bengaluru wish to run a consulting practice. They want limited liability, flexibility of internal management by agreement, and perpetual succession, without the compliance load of a company. Which form suits them best?

A Limited Liability Partnership suits them because it is a separate legal entity with perpetual succession and limited liability for partners, while allowing internal management by agreement, with lighter compliance than a company. A general partnership leaves partners personally liable.

  1. AGeneral partnership under the Partnership Act
  2. BLimited Liability PartnershipCorrect
  3. CSole proprietorship held jointly
  4. DUnregistered association of persons

Explanation

An LLP is a body corporate with separate legal entity status, perpetual succession, and limited liability of partners, while its internal management is governed by agreement among partners. A general partnership gives unlimited liability and no perpetual succession, so it fails the requirements.

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