Question 4 (a)

An LLP combines the advantages of a traditional partnership and a company

6 marks

Time to write
About 12 minutes
Topic
LLP: nature, features, comparisons, small LLP
Notes
Crux notes

Question

Question 4 (a) · 6 marks

A Limited Liability Partnership combines the advantages of both the Traditional Partnership and the Company. Discuss.

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

12 minfor 6 marks

Read from the question

  • DiscussA statement to explain: say what it means first, then build the answer around it.

Write it in this order

  1. Read; underline the asks; jot your points 1 min
  2. 1 Drawbacks of partnership removed 3 marks 5 min
  3. 2 Advantages of a company taken; flexibility kept 3 marks 5 min
  4. Check: every ask answered, key terms underlined 1 min

Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks.

Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

An LLP is an alternative corporate form that combines a company's limited liability with the flexibility of a partnership.

Picture itAn LLP combines the advantages of a traditional partnership and a company

1The firm's debt reaches the house: the sofa and the TV ride away on the creditor's truck.

Partnership firmUnlimited, extending to the partners' personal assets.

2Under an LLP only the office desk goes; the couple watch from their own gate, home untouched.

LLPLimited to the agreed contribution, except in wilful fraud.

Drawbacks of a traditional partnership removed.

  1. Unlimited liability of partners, extending to their personal assets, is replaced by liability limited to the agreed contribution; the LLP alone is liable to the full extent of its assets.
  2. Mutual agency: in a firm each partner binds all the others; in an LLP each partner is an agent of the LLP only, and no partner is liable for another's independent or unauthorised acts or misconduct.
  3. No separate existence: a firm may be dissolved by a change of partners; an LLP is a body corporate with perpetual succession, unaffected by the death, insanity, retirement or insolvency of partners.

Advantages of a company taken.

  1. Separate legal entity: it can contract, hold property, and sue and be sued in its own name.
  2. Limited liability of its members.
  3. Perpetual succession and an optional common seal.

At the same time it keeps the partnership's flexibility: its internal structure is organised by agreement among the partners, at low compliance cost, without the detailed statutory governance of a company.

Where the 6 marks sit

#ComponentMarks
1Drawbacks of partnership removed3
2Advantages of a company taken; flexibility kept3
Total6
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