Answered: What is the nature of liability of…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Question

What is the nature of liability of limited partners as to limited partnership debts or obligations?

A. They are liable up to the extent of their capital contribution only

B. They are liable pro-rata up to the extent of their separate assets after the partnership assets are exhausted

C. They are liable pro-rata up to the extent of their capital contribution only

D. They are liable equally up to the extent of their separate assets after the partnership assets are exhausted

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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