Limited Liability Partnerships: A Business Model to Achieve Entrepreneurial Efficiency

Abstract

The Limited Liability Partnerships (LLP) is a relatively new model of business organization. The present research has been carried out to provide empirical-based handful information to the small scale entrepreneurs and policymakers about the impact of the adoption of the LLP model and how it can be used as a strategy to make the venture successful. For this study sample data analyzed to determine the correlation between the choice of business organization and output level of firms by taking capital and labor as independent variables. Since LLP is considered more entrepreneurial friendly to small and medium-sized firms, entrepreneurial expertise to utilize capital and labor before and after the adoption of the LLP form has been specifically investigated. This Existing research supports the economic theory of limited liability and probability to choose limited liability while the present study is focused on determining the efficiency, if any, achieved by adoption of limited liability model by the small business firms. By using the Cobb-Douglas model the article analyses the efficiency derived from the adoption of a limited liability model. The empirical results show that entrepreneurs have gained achieved efficiency through the adoption of LLP model. The entrepreneurs under the LLP model can pool and efficiently utilize capital as compared to labor employed. Thus for entrepreneurial growth and economic development business organization models like LLP should be encouraged and must be adopted as a business strategy to minimize risk exposure.