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CMA Foundation · Fundamentals of Financial and Cost Accounting · Four Frameworks of Accounting and Forms of Organization

Which form of organization allows its partners to enjoy limited liability while being taxed and operated as a partnership-like body, being a separate legal entity in India?

The Limited Liability Partnership is the correct form. Under the LLP Act, 2008 it is a separate legal entity and its partners' liability is limited to their agreed contribution, while internal management remains flexible like a partnership. Ordinary firms and proprietorships give unlimited liability.

  1. AHindu Undivided Family business
  2. BLimited Liability PartnershipCorrect
  3. COrdinary partnership firm
  4. DSole proprietorship

Explanation

An LLP under the Limited Liability Partnership Act, 2008 is a body corporate and separate legal entity, with each partner's liability limited to the agreed contribution, while retaining partnership-like internal management. An ordinary firm has no separate legal entity and its partners bear unlimited liability.

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