Question

Sam Mueller and Geoffrey Robinson enter into a limited partnership in which Sam is the general partner and Geoffrey is the limited partner.They borrow $50,000 to start a business.Keeping all rules of naming their businesses in mind,they start a law firm named Robinson-Mueller Legal Associates.Martin Humphrey joins them after eleven months as a general partner but does not include his surname in the name of the business.If the business fails,which of the following is true?
A)Only Sam, being the sole general partner is liable to the creditor.
B)Martin has unlimited personal liability for not including his surname in the name of the business.
C)Geoffrey is liable as a general partner as he included his surname in the business with full knowledge.
D)All three partners are equally liable to the creditor, irrespective of including their surname in the title of the business.

Answer 1

Answer: D

All three partners are equally liable to the creditor, irrespective of including their surname in the title of the business

Explanation:

Taking a step back, we look into what a partnership is.

PARTNERSHIP:- this is a business which is formed by two or more persons, or group of individual with the sole aim of making profit and growing the business.

The set of business called partnership is also backed by law

It is a legal entity. It can sue and be sued. We also have various types of partner in a partnership business. Which are are follows

Silent partner,

Limited partner,

General partner.

Sam and Geoffrey, both borrowed $50,000 to start up their partnership business, with a goal of making profit and growing the business.

As a result they get their business register and inducted by law.

Although Sam is a general partner while Geoffrey is a limited partner, and as a result have different share when its comes to the profit of the business also with the loss as well.

Sam and Geoffrey both added their surname while registering the business, a new partner named Martin joins the partner business but did not include his surname to the business name.

Now, the business has fallen and at a loss and still owes a debt of $50,000 which was borrowed to start up the business.

The partnership business as a whole will be liable to the creditor, to pay back for the loss.

Sam being a General partner, in the business and Geoffrey being a limited partner in the business and both have their surname in the business, while martin whose surname is not included in the business name and is a general partner of the business.

All have losses towards the business and liable to the creditor, irrespective of their surname included or not in the business name.

The business is a legal entity, as long as you involved then taking part in the loss, when the business falls is inevitable.

Therefore, Sam, Geoffrey and Martin are liable to the creditor irrespective of their surname in the business,

Note;- the loss will be shared with the rate at which they share the business profit as well... A general partner taking the huge brunt of the loss.