ACCA Applied Skills · Corporate and Business Law (Global) · Partnerships
Elena invests money in a firm run by Farid and Gus. Under a limited partnership arrangement she is a limited partner, and she takes no part in management. Which statement best describes her position?
Elena's liability is limited to the amount she invested, provided she does not take part in managing the business. Limited partners are protected only while passive; the general partners, Farid and Gus, carry unlimited liability for the firm's debts.
- AHer liability is limited to the amount she invested, provided she does not take part in managing the businessCorrect
- BShe has unlimited liability like the general partners but may not vote
- CShe is liable for the firm's debts only if she was named in the firm's name
- DShe is treated as an employee of the firm and has no liability
Explanation
A limited partner's liability is generally capped at the capital contributed, so long as she does not participate in management. If she takes part in management she risks losing that protection. At least one general partner must have unlimited liability.
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