William and Nigel decide to start a partnership business. They ask their friend Sophia to become a limited partner in order to help them with additional funds to get the business started. Which of the following statements about Sophia would be correct if she becomes and remains a limited partner in this scenario?
A) She may be involved in management of the business but to a rather limited degree.
B) She cannot be entitled to any share in the profits of the business.
C) She may lose her investment if the business fails, but she will have no personal liability for partnership debts.
D) She may be considered an employee and therefore will be entitled to wages for the services she renders to the partnership.

Question

Quizplus · Accepted Answer

In this scenario, Sophia may lose her investment if the business fails, but she will have no personal liability for partnership debts. Limited partners who do not participate in management and shareholders in a corporation may lose their investment if the business fails. However, they have no further liability to creditors of the business or to victims of torts that are attributable to the business.

William and Nigel Decide to Start a Partnership Business