Read each question and choose the best answer.

Question

What risk do limited partners face that general partners do not?
A. complete dependence on business abilities of others
B. necessity of meeting rigid operational standards
C. need to report earnings from business as income
D. possibility of having personal assets used to meet business obligations

Answer 1

The best answer is:

A. complete dependence on business abilities of others.

Limited partners invest in a business but do not have control over its operations, making them dependent on the general partners’ business abilities to manage the partnership effectively. In contrast, general partners have control and responsibility for running the business and do not face this specific risk.