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

Nadia wishes to invest money in a limited partnership formed under a law based on the standard Global model, but she does not want to take part in running the business. Which statement best describes her position as a limited partner?

A limited partner's liability is restricted to the capital she has contributed or agreed to contribute, provided she does not take part in managing the business. If she manages, she risks losing that protection. Only general partners have unlimited liability.

  1. AHer liability is limited to the amount she has contributed or agreed to contribute, provided she does not take part in managementCorrect
  2. BShe has unlimited personal liability for all debts, as with a general partner
  3. CShe can manage the business freely and still keep limited liability

Explanation

A limited partner's liability is capped at her contribution, but this protection depends on her not taking part in management. Option B describes a general partner. Option C is wrong because managing the business can cost her the protection.

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