Discuss the following different forms of partnerships: (i) General partnership (ii) Limited partnership (iii) Limited partner (6 marks)

Question Six

(a) Discuss the following different forms of partnerships:

(i) General partnership

A general partnership involves two or more individuals who share in the management, profits, and liabilities of a business. Each partner has unlimited personal liability for the debts and obligations of the partnership. This means their personal assets can be used to satisfy business debts. Partners have equal rights in management and decision-making.

(ii) Limited partnership

A limited partnership consists of at least one general partner and one or more limited partners. General partners manage the business and have unlimited liability. Limited partners contribute capital and have limited liability, meaning their liability is restricted to their investment. They do not participate in management.

(iii) Limited partner

A limited partner is an investor in a limited partnership who does not engage in day-to-day management. Their liability is limited to the amount of their capital contribution. If they participate in management, they risk losing their limited liability status.

General partnerships involve shared management and liability; limited partnerships have both general and limited partners, with limited partners having restricted liability.