Alex and Bailey opened a dance studio together as general partners. They each invested $10,000 of their personal savings. After one year in business, they decided to close the doors. Their partnership agreement said they would divide profits and losses 50/50. They have more debt than assets. Alex and Bailey will each ________.
A)lose only $10,000, the amount they invested since they agreed to share profits and losses 50/50
B)lose personal assets to repay the debt since a partnership is not considered to be a separate entity from the partners who own it
C)collect the debt from their former customers since the customers accepted responsibility for the business when they purchased services
D)avoid any liability for the debt since a partnership is considered to be a separate entity from the partners who own it

Question

Quizplus · Accepted Answer

As general partners, Alex and Bailey are personally liable for the debts of the partnership because a partnership is not considered a separate legal entity from its owners. Therefore, they will have to use their personal assets to pay off the debt. Since the partnership agreement states that profits and losses are to be split 50/50, they will each lose $10,000 of their personal investment.

Alex and Bailey Opened a Dance Studio Together as General