[SoCalCPA]

According to Becker, a limited partner who participates in control of the business is liable to any creditor who reasonably believes he is a general partner. As such, I think the example below should have full personal liability. The answer says otherwise, so any help would be appreciated!

Q) Juan is a limited partner at A-corp, LP. Juan visited Cow Inc., a local supplier of food claiming to be a partner in the partnership and negotiated a distribution contract between the supplier and LP on behalf of the partnership. As a result of these actions, Juan:

A) Has limited liability as a limited partner to all creditors except Chow, Inc.

Me- How is that possible? Didn’t Juan act as a general partner, and so he should be personally liable? Other possible answers were…

– “has limited liability as a limited partner in reference to all creditors”

– “has full personal liability to all creditors”

– “none of the above.”

Thank you for helping me understand!

B - (4/2012)
A - (5/2012)
R - (1/2012) Done!
F - (10/2011) Done!

[hopeful_cpa]

This makes sense as he DOES NOT have limited liability to Cow Inc as he acted as a general partner (participates in management). Since he DID NOT do this with other creditors, he will remain as a limited partner in those areas and maintain his limited liability.

In the first other answer choice, the word “ALL” makes the question incorrect, full personal liability to ALL creditors is incorrect, and none of the above is incorrect.

I hope this helps =), if not I'll try to explain it better.

BEC: Done
REG: Done
AUD: Done
FAR: Done

I'M DONE!!!!!! AAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[SoCalCPA]

Wow I'm so stupid… lol! Thanks, I guess I didn't read the answer choice correct. So to confirm, he does have full personal liability to Cow Inc., though right?

B - (4/2012)
A - (5/2012)
R - (1/2012) Done!
F - (10/2011) Done!

[hopeful_cpa]

no, you're not stupid… the way they word these questions and answers could be done so much more simpler lol.

yes, he does have full personal liability to cow inc because he acted outside of his “limited” partner scope and more as a general partner, thereby losing his limited partner status only with cow.

BEC: Done
REG: Done
AUD: Done
FAR: Done

I'M DONE!!!!!! AAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Author]

Replies