Question

Wanda, Derek, and Mitchell formed B. Flowers, LLP three years ago. A year ago, Derek and Mitchell decided that the company was ready to open a new location and had B. Flowers take out a loan from a bank for the extra capital needed to expand. The new location has not performed well, and B. Flowers is unable to pay the remaining $50,000 owed to the bank. Is Wanda liable to the bank for the debt?
a. Yes, because she is a partner.
b. No, unless the partners have not complied with the LLP statutory filing requirements.
c. Yes, if she authorized the loan.
d. No, because partners in an LLP are never liable for the debts of the partnership.

Answer 1

Answer:

B) No, unless the partners have not complied with the LLP statutory filing requirements.

Explanation:

When partners form a limited liability partnership (LLP), each partner's liability is limited to the total amount invested in the business, unlike regular partnerships were liability is unlimited.

Since this business didn't perform well, the bank can try to collect the money owned from the partnership only, it cannot go after the partners' personal assets.

Of course, the partnership must have completed all the necessary legal requirements and paperwork.