Question

Silva and Ron start a taxi service together. Ron only invests money in the venture and does not actively participate in managing the business. Silva, on the other hand, manages the venture entirely. According to the agreement between Silva and Ron, Silva is personally responsible for the debts and losses while Ron takes responsibility of the debts only up to a certain amount. The agreement also mentions that Ron cannot participate in the management of the business. In this scenario, Ron and Silva have formed a _____.

a. sole proprietorship
b. general union
c. limited partnership
d. corporation

Answer 1

Ron and Silva have formed a limited partnership, where Ron is the limited partner and Silva is the general partner.

Step-by-step explanation:

In this scenario, Ron and Silva have formed a limited partnership.

A limited partnership is a type of business organization where there are two or more partners, with at least one general partner and at least one limited partner. In this case, Ron is the limited partner who has invested money in the venture but does not participate in managing the business, while Silva is the general partner who manages the venture entirely and takes on personal responsibility for the debts and losses.

The agreement between Ron and Silva specifies that Ron has limited liability for the debts, meaning his financial responsibility is limited up to a certain amount. Additionally, Ron is not allowed to participate in the management of the business.