What is the distinguishing feature of the limited partnership?
(a)The partners run the business together and share all profits and losses according to the partnership agreement.
(b)The partners have liabilities limited to their personal assets only.
(c)Some partners are involved as investors while other partners manage every day operations.
(d)The partners have their investments protected from the creditors; however, they are liable for up to the amount of
their assets.
(e)The partners can elect the board of directors that selects the managers to run the business in the interest of the
partners.
I answered (b) on my test, but my teacher marked it wrong. I'm now confused about this. Any help would be appreciated.
A limited partnership is a type of partnership that has distinguishing features. In a limited partnership, there are two types of partners: general partners and limited partners. The distinguishing feature of a limited partnership is that some partners are involved as investors while other partners manage everyday operations.
So, the correct answer to the question is (c) "Some partners are involved as investors while other partners manage every day operations."
Option (a) is incorrect because in a limited partnership, the distribution of profits and losses is not necessarily according to the partnership agreement. Limited partners typically have limited involvement in the management of the business and may not participate in the day-to-day operations.
Option (b) is also incorrect because the distinguishing feature of a limited partnership is that limited partners are not solely liable for the partnership's debts and obligations. Their liability is limited to the amount they have invested in the partnership, but their personal assets can still be at risk.
Option (d) is incorrect because it describes a different concept known as limited liability, which is not unique to limited partnerships.
Option (e) is also incorrect because limited partners generally do not have a role in electing a board of directors or selecting managers to run the business.
I hope this clears up your confusion. If you have any further questions, feel free to ask!