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CFA Level I · CFA Level I Exam · Organizational Forms, Corporate Issuer Features, and Ownership

Two partners run a general partnership. One partner signs a supplier contract that the business cannot pay. Which statement about liability is most accurate?

Each general partner can be held personally liable for the full obligation. General partnerships give partners unlimited, joint and several liability, so a creditor may pursue any partner's personal assets. Liability limited to the capital contributed is a feature of limited partners, not general partners.

  1. ALiability is limited to each partner's capital contribution.
  2. BOnly the partner who signed the contract is liable for the debt.
  3. CEach general partner can be held personally liable for the full obligation.Correct

Explanation

In a general partnership, partners have joint and several unlimited liability, so a creditor can pursue any partner for the whole debt. Limiting liability to the capital contribution applies to limited partners, and liability is not restricted to the signer.

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