The two friends Sonia and Raman started a business by the name of 'sonio fancy dress shoppy'. Both of them invested equal capital in the business at the start of the business sonia has place one condition before Raman that if unfortunately they suffered a heavy loss in their business she would not be able to give anything except the capital invested in the business. Raman had accepted this terms and conditions that Sonia would not enjoy the right to participate in the management of the firm. Their business was gradually growing well and they were fully satisfied with their business.
A. To what form of business organisation is concern in the above para.
B. Identify and explain the type of the firm of organisation identify in question A

Dear Student,

A. Its a partnership firm which is concerned in the given para.

B. It is a limited liability partnership firm. 
 Limited Partnership: In a limited partnership, the liability of at least one partner is unlimited whereas the rest may have limited liability. Such a partnership does not get terminated with the death, lunacy or insolvency of the limited partners.
The limited partners do not enjoy the right of management and their acts do not bind the firm or the other partners. Registration of such partnership is compulsory.
This form of partnership was not permitted in India earlier. The permission to form partnership firms with limited liability has been granted after the introduction of New Small Enterprise Policy in 1991. The idea behind such a move has been to enable the partnership firms to attract equity capital from friends and relatives of small scale entrepreneurs who were earlier reluctant to help, due to the existence of unlimited liability clause in the partnership form of business.


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