Question

Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt? Select one: a. Only Jack is personally liable for the debt, since he has been the managing partner during that time. b. Only Jill is personally liable for the debt of the business, since Jack has been working and she has not. c. Both Jack and Jill are personally liable for the business debt. d. Neither Jack nor Jill is personally liable for the business debt, since the partnership is a separate legal entity.

Answer 1

The answer is: Both Jack and Jill are personally liable for the business debt.

Our personal assets would not be protected under a partnerships. (if people want to protect their personal assets from loss, they usually form a corporation).

In partnerships, all loss and profit would be spread proportionally to the percentage of ownership owned by each partners. No matter who make the mistake, all partners would be subjected to the loss.