CFA Level I · CFA Level I Exam · Investors and Other Stakeholders
A group of three friends starts a consulting business and shares management decisions equally. Each partner is personally liable for all of the business's debts. This organizational form is best described as a:
The business is best described as a general partnership. Partners jointly manage the firm and each carries unlimited personal liability for its debts. Limited liability companies and corporations protect owners' personal assets, so neither matches a structure in which partners are personally responsible for all obligations.
- Ageneral partnershipCorrect
- Blimited liability company
- Cpublicly listed corporation
Explanation
In a general partnership, all partners share in management and have unlimited personal liability for the partnership's obligations. A limited liability company and a corporation both shield owners' personal assets from business debts, so they do not fit the description.
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