What type of partnership allows firms to limit their liability?

A Limited Liability Partnership (LLP) is a specific type of partnership that allows partners to limit their personal liability for certain business debts and obligations. This structure provides an attractive option for professionals, such as lawyers and accountants, who wish to work together while safeguarding their personal assets from the liabilities incurred by other partners in the business.

In an LLP, while partners can generally participate in management without losing their shield from liability, they are still accountable for their own professional negligence. However, they are protected from the economic responsibility for the negligent acts of their partners, which is a crucial distinction from a general partnership where partners can be fully liable for each other's actions.

This structure is especially beneficial in fields that involve significant professional risk, allowing firms the flexibility to operate collaboratively while providing a level of protection that encourages innovation and teamwork without undue fear of financial ruin due to a colleague's actions.

The other options represent different business structures that either do not offer limited liability to partners—such as general partnerships—or belong to entirely different categories, such as limited liability companies (LLCs) or professional corporations, which have their own unique regulations and implications for liability and governance.