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IAI Actuarial Core Principles · Business Management · Separate legal personality, directors' duties, shareholders and partnerships

Two actuaries, Preeti and Qadir, are considering a vehicle for their new advisory practice in Mumbai. They want limited personal liability and to retain flexible internal management by agreement. Which structure best meets both aims under Indian law?

A limited liability partnership is the best fit, because it gives partners limited personal liability and a separate legal identity while letting them set internal management through the LLP agreement. A general partnership would leave both partners with unlimited personal liability.

  1. AA general partnership under the Indian Partnership Act, 1932
  2. BA sole proprietorship in Preeti's name
  3. CA limited liability partnership under the LLP Act, 2008Correct
  4. DAn unregistered association of persons
  5. A Hindu undivided family firm

Explanation

An LLP combines limited liability with the partnership-style internal flexibility set by the LLP agreement. A general partnership gives unlimited joint and several liability. A sole proprietorship and an unregistered association give no limited liability either.

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