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ACCA Applied Skills · Corporate and Business Law (Global) · Partnerships

Delmar, Esi and Farid run a consultancy as a general partnership. A client obtains judgment against the firm for 90,000 for negligent advice. The firm's assets are only 30,000. Which statement describes the position of the partners?

The partners are personally liable for the 60,000 shortfall. A general partnership gives no limited liability, so creditors can claim against the partners' private assets, not just capital contributed or the negligent partner alone.

  1. AEach partner is liable only up to the capital he or she contributed
  2. BThe partners are personally liable for the shortfall, because a general partnership has no separate liability shieldCorrect
  3. COnly the partner who gave the advice is liable for the shortfall

Explanation

In a general partnership partners have unlimited personal liability for the firm's debts, so the 60,000 shortfall can be pursued against their personal assets. Option A describes limited liability, which a general partner lacks. Option C is wrong because partners are generally jointly liable for the firm's obligations to third parties, not only the one who acted.

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