ExpertEasy2 marksMultiple Choice
The formation and constitution of business organisationsSection ASyllabus DCorporate and Business Law
ACCA · Question 11 · The formation and constitution of business organisations
A group of architects wishes to form a business. They want the flexibility of a traditional partnership regarding internal management, but they also want to protect their personal assets from the business's debts.
Which business structure is most appropriate for them?
A group of architects wishes to form a business. They want the flexibility of a traditional partnership regarding internal management, but they also want to protect their personal assets from the business's debts.
Which business structure is most appropriate for them?
Answer options:
A.
A general partnership under the Partnership Act 1890.
B.
A private limited company (Ltd).
C.
A Limited Liability Partnership (LLP).
D.
A sole trader structure with multiple owners.
How to approach this question
Identify the two key requirements: internal flexibility (partnership trait) and asset protection (limited liability trait). Match these to the hybrid structure.
Full Answer
C.A Limited Liability Partnership (LLP).✓ Correct
A Limited Liability Partnership (LLP) is a distinct legal entity that provides limited liability to its members, protecting their personal assets. However, internally, it is organized and taxed much like a traditional partnership, offering the flexibility the architects desire.
Common mistakes
Choosing a private limited company, forgetting that companies have rigid internal management structures governed by the Companies Act.
Practice the full ACCA LW — Corporate and Business Law Practice Exam 2
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