Final answer:
An LLP or limited liability partnership is a business structure that protects partners' personal assets by limiting liability to their investment in the company, but it can have disadvantages such as mutual responsibility for partners' actions.
Step-by-step explanation:
The abbreviation LLP stands for a limited liability partnership. This business structure allows partners to limit their personal liability to the amount they have invested in the company, protecting their personal assets (like a home or car) from being at risk if the business fails. However, it comes with the disadvantage that partners are responsible for each other's actions, meaning that the wrongful acts of one partner could leave the others liable.
Compared to a sole proprietorship, where the owner has unlimited liability for the business's debts, an LLP provides a layer of protection. However, the partnership can also be more fragile in terms of longevity, as it may change or dissolve when a partner leaves or passes away.
Different business structures offer varying levels of personal liability protection and operational control, including sole proprietorships, partnerships, corporations, and LLCs. When establishing a business, such as a private company, it's important to consider these factors carefully to determine the most suitable form.