What is the main purpose of forming a limited liability partnership (LLP)?
Practice Questions
1 question
Q1
What is the main purpose of forming a limited liability partnership (LLP)?
To avoid double taxation
To limit personal liability
To simplify management
To increase ownership control
The primary purpose of an LLP is to provide limited liability protection to its partners while allowing them to participate in management.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the main purpose of forming a limited liability partnership (LLP)?
Solution: The primary purpose of an LLP is to provide limited liability protection to its partners while allowing them to participate in management.
Steps: 6
Step 1: Understand what a partnership is. A partnership is when two or more people work together in a business.
Step 2: Learn about liability. Liability means being responsible for debts or legal issues.
Step 3: Know what limited liability means. Limited liability means that partners are not personally responsible for the business's debts beyond their investment.
Step 4: Recognize the benefits of an LLP. An LLP protects partners from losing personal assets if the business fails.
Step 5: Understand management participation. In an LLP, partners can still be involved in running the business while enjoying limited liability.
Step 6: Conclude that the main purpose of forming an LLP is to protect partners' personal assets while allowing them to manage the business.
