When two of Mercedes's friends approached her about starting a business, Mercedes's was sure she did not want to risk any amount beyond her initial investment or be involved with the day-to-day management. However, she was willing to invest in the business. Mercedes's preferences suggest that she prefers a general partnership form of business ownership.

Question

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In a general partnership, all partners share in the management of the business, and have unlimited liability for the firm's debts. Since Mercedes's has no interest in managing a company and wants to limit her risk, she is more suited for a limited partnership, where her friends would serve as general partners and she would serve as a limited partner.

When Two of Mercedes's Friends Approached Her About Starting a Business