Future Business Leaders of America (FBLA) Business Law Practice Exam

What defines a partnership formed by two or more persons?

1. One or more general partners and one or more silent partners

2. Only one general partner and multiple limited partners

3. One or more general partners and one or more limited partners

4. A single entity acting as both general and limited partner

The correct answer is: One or more general partners and one or more limited partners

A partnership formed by two or more persons is characterized by the combination of one or more general partners and one or more limited partners. General partners are those who manage the partnership and are personally liable for its debts. On the other hand, limited partners contribute capital and share in the profits but do not have a role in managing the business and have limited liability up to the extent of their investment. This structure allows for a flexible management and financial contribution model, where general partners take on more risk and responsibility, while limited partners can invest without the same level of involvement or exposure to liability. The distinction is crucial in understanding the dynamics of the partnership, as it influences not only how profits are shared but also how liabilities are handled. Other structures, such as having only one general partner with multiple limited partners, or scenarios with silent partners and general partners, do not fully encompass the comprehensive relationship found in a partnership of both general and limited partners, thus making option C the most accurate representation of a partnership’s formation.