Paralegal Advanced Competency Exam (PACE) Practice Exam

How is a Limited Liability Partnership (LLP) typically restricted?

1. To only non-profit organizations

2. To professionals such as lawyers and accountants

3. To partnerships with more than three members

4. To only individuals with limited income

The correct answer is: To professionals such as lawyers and accountants

A Limited Liability Partnership (LLP) is primarily characterized by its structure, which provides limited liability to all partners, protecting them from personal responsibility for the debts and obligations of the partnership. This business structure is generally used by professional service providers, such as lawyers and accountants. The reason this answer is correct stems from the typical regulatory framework governing LLPs, which often restricts their formation to certain professions that require a high level of education and licensing. Such provisions are put in place to ensure that those in professions that have significant personal liability exposure are afforded the benefits of an LLP. In contrast, the other choices presented are not valid restrictions for LLPs. For example, LLPs are not exclusively limited to non-profit organizations, do not have a specific restriction on the number of partners (more than three), and are not confined to individuals with limited income. Instead, the focus on professional entities aligns with the intent behind LLP legislation, making option B the accurate representation of how LLPs are typically restricted.