In a general partnership, what is the liability exposure of each partner for business debts and obligations?
Correct Answer
D) Joint and several unlimited liability
In a general partnership, each partner has joint and several unlimited liability, meaning each partner can be held personally responsible for all partnership debts and obligations, regardless of their ownership percentage.
Why This Is the Correct Answer
In a general partnership, each partner has joint and several unlimited liability for all partnership debts and obligations. This means creditors can pursue any individual partner for the full amount of partnership debts, regardless of that partner's ownership percentage or capital contribution. Each partner's personal assets are at risk to satisfy partnership obligations, making this the most exposed form of business liability.
Why the Other Options Are Wrong
Option A: No personal liability
Limited liability based on capital contribution applies to limited partners in limited partnerships or members in LLCs, not general partners. General partners face unlimited personal liability that extends far beyond their initial investment or capital contribution to the partnership.
Option B: Limited to a predetermined amount
General partners have significant personal liability, not no liability. This option describes the liability protection found in corporations or LLCs where owners' personal assets are generally protected from business debts, which is the opposite of general partnership liability rules.
Memory Technique
Remember 'General = Generally in trouble' - general partners are generally liable for everything, unlike limited partners who have limited liability.
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