Bob,Carol and Ted have decided to go into businesses as a limited partnership importing and selling exotic spices.Bob and Carol will manage the business and Ted will have no role in the day to day operations.Bob and Carol contributed have each invested $500,000 and Ted has contributed the building and land that the business will be operated from.Alice,a customer,contracts a rare disease from a contaminated spice sold by the company and sues.Alice is awarded a judgment for $5 million.After she exhausts the assets of the partnership,having the property and building sold and seizing all other property,$3 million remains unpaid.

Question

Quizplus · Accepted Answer

As a limited partnership, all partners are jointly and severally liable for the debts and obligations of the partnership. In this case, the judgment awarded to Alice was a debt of the partnership, and after the assets of the partnership were exhausted, there was still $3 million outstanding. Therefore, Bob and Carol each owe $3 million jointly and severally, meaning that Alice can sue one or both of them for the entire $3 million balance. Ted, as a partner with no role in the day to day operations, has no additional liability beyond his contribution of the building and land.

Bob,Carol and Ted Have Decided to Go into Businesses as a Limited