Future Business Leaders of America (FBLA) Agribusiness Practice Test

What is a key feature of a limited partner?

1. They are involved in daily management

2. They are personally liable for all partnership obligations

3. They are not liable beyond their capital contribution

4. They have decision-making authority

The correct answer is: They are not liable beyond their capital contribution

A limited partner is a key player in a limited partnership structure, where their role is distinctly different from that of a general partner. The primary characteristic of a limited partner is that they are not personally liable beyond their capital contribution to the partnership. This means that if the partnership incurs debts or faces legal action, the limited partner's risk is confined to the amount of money they invested in the business. This feature creates an attractive investment opportunity for individuals who want to invest in a business without exposing themselves to excessive personal risk. As a result, limited partners can benefit from the potential profits of the partnership while having their liability limited to the investment they made. In contrast, general partners are responsible for the daily management of the business and incur full personal liability for the debts of the partnership, which is why those features are not applicable to limited partners.