Answered: Which of the following roles best fits…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Question

Which of the following roles best fits the situation?

Apol wants to start or join a business but is not sure which business organization would be best. She has a large amount of capital but does not yet have any partners who can invest in or effectively manage the business.

Neither a limited or general partner would be a good choice.
General partner in a limited partnership.
Limited partner in a limited partnership.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Expert Solution

Step 1

Partnership:

A partnership is a type of business organization in which two or more people (referred to as partners) own and operate a business together. Partnerships can be a flexible and relatively simple way for individuals to start and run a business together. There are several types of partnerships, including:

General Partnership: In a general partnership, all partners are responsible for managing the business and share in the profits and losses of the business. Each partner is also personally liable for the partnership's debts and obligations.
Limited Partnership: In a limited partnership, there are one or more general partners who manage the business and are personally liable for the partnership's debts, and one or more limited partners who contribute capital to the business but have limited liability and are not involved in management.
Limited Liability Partnership (LLP): An LLP is a type of partnership in which all partners have limited liability for the partnership's debts and obligations. However, each partner is still responsible for their own actions within the business.
Joint Venture: A joint venture is a type of partnership in which two or more parties come together to undertake a specific business project or venture. Joint ventures can be formed for a limited period of time or for a specific purpose.