Commercial Applications
A company required funding for expansion but did not want unlimited liability for its partners. What type of partnership would best suit their needs?
- General Partnership
- Partnership at Will
- Limited Liability Partnership (LLP)
- Particular Partnership
Answer
Limited Liability Partnership (LLP)
Reason — In an LLP, the liability of partners is limited to their agreed contributions to the LLP. Also, since there is no limit on the number of partners, an LLP can raise huge funds for expansion and growth of business. Hence, LLP best suits a company that requires expansion funding but does not want unlimited liability for its partners.
Related Questions
Which of the following is NOT a demerit of partnership?
- Unlimited liability
- Limited Resources
- Secrecy
- Lack of public confidence
Meera, a partner in a firm, withdraws her share of capital without informing the other partners, resulting in financial strain on the firm. Which feature of partnership prevents such actions?
- Mutual consent among partners
- Written agreement
- Sharing of profits and losses
- Unlimited liability
In a partnership at will, any partner can dissolve the firm by giving notice to the other partners.
- True
- False
Two friends, Ajay and Sameer, jointly own a property but do not run a business with it. Can this arrangement be considered a partnership?
- Yes, because they jointly own a property
- No, because they are not running a business
- Yes, if they share the rental income equally
- No, because partnership must involve more than two people