Partnerships

The Series 65/66 exams definitely consider limited and general partnerships to be fair game, as they indicate on their exam outlines. How would you navigate a question like this one …

Which of the following is an accurate statement of the business structures known as “general partnerships” and/or “limited partnerships”?
A. only limited partnerships allow for direct flow-through of income and expenses
B. both ownership structures leave at least some owners with unlimited liability
C. general partnerships are no longer enforceable effective January 1, 2011
D. general partnerships relieve the owners of personal liability

EXPLANATION: a general partnership is really just a sole proprietorship with more than one owner. These folks want to go into business together, so they form a general partnership. It does provide for flow-through of income and expenses, but it also leaves all general partners personally liable for debts and lawsuits of and against the business. To form a limited partnership, you have to have at least one general partner (GP), and GP’s always have unlimited liability. Don’t read a choice like Choice C and automatically assume you forgot to study something. The Exam occasionally makes stuff up to see if you’ll fall for it when a much better answer was available. Don’t do that. Instead choose answer …

ANSWER: B

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