Sam, Alfredo, and Juan want to start a small U. S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt? a. Corporation

b. Joint stock company

c. Limited partnership

d. General partnership

Question

Business

Skye

14 May, 04:13

Sam, Alfredo, and Juan want to start a small U. S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt? a. Corporation

b. Joint stock company

c. Limited partnership

d. General partnership

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Answers (1)

Know the Answer?

Danielle Mcintosh · Answer 1

Correct option is (c)

Explanation:

Limited partnership firm is a type of partnership where one or more partners agree to carry out the operations and assume all liabilities of the firm. They are personally liable for the debts of the firm. The other partner is a dormant partner who cannot actively participate in the operations of the firm but has only limited liability. In other words, he is liable for the debt limited to the share owned by him. Profit sharing is equal between the partners.

Here, Sam and Alfredo share unlimited liability and actively involve in the business while Juan is a dormant partner. They should adopt limited Partnership.