Laura is an investor and a limited partner in a limited partnership. Two years after she becomes a limited partner, Laura thinks that the general partners are not doing a very good job managing the affairs of the limited partnership and participates in the management of the limited partnership. While she is participating in management, a bank loans $1 million to the limited partnership, believing that Laura is a general partner. If the limited partnership defaults on the $1 million loan, which of the following holds well?

Question

Quizplus · Accepted Answer

As Laura participated in the management of the limited partnership, the bank may have believed her to be a general partner, which could lead to personal liability. Even though Laura is a limited partner on paper, her actions of participating in management could make her liable for the debts and obligations of the limited partnership, especially if the bank acted in good faith in believing she was a general partner. Therefore, Laura may be personally liable for the $1 million loan if the bank believed her to be a general partner. Option A and C are incorrect as they misinterpret the concept of limited liability for limited partners. Option D is also incorrect as it provides an oversimplified interpretation of the limited partner's liability.

Laura Is an Investor and a Limited Partner in a Limited