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Partner's Capital Accounts

Liability of ...

Question

Liability of partners in a partnership business is _________.

A

limited

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B

unlimited

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C

limited and unlimited

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D

none of these

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Solution

The correct option is B unlimited
In a general partnership, each partner has unlimited personal liability. Partnership rules usually dictate that whatever debts are incurred by the business, it is the legal responsibility of all partners to pay them off.

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Q. Name of the following:
(a) A partnership in which the liability of one or more partners is limited.
(b) A partnership which is set up for an indefinite period of time.
(c) The document containing the terms and conditions of a partnership.
(d) The partner who contributes capital but does not take active part in the management.
(e) Person who lends his name and goodwill for the benefit of a partnership firm.

Q. State with reasons whether the following statements are True or False.
In a partnership firm, the liability of partners is unlimited.

Q. If the remaining partner wants to continue the business, after the retirement of a partner, a new partnership agreement is ______.

Q. In a partnership business if there is no specific agreement among partners, profit is distributed in the ___________.

Q. LEGAL PRINCIPLE: Every partner in a partnership firm is liable for the acts of every other partner during the course of business of the partnership firm.
FACTUAL SITUATION: A, a partner in the firm XYZ with another partner B takes loan from a bank for the partnership firm. A misuses the fund for his personal use. B is very resourceful person. Can the bank demand the entire money from B?
DECIDE.

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