Final answer:
A general partnership is likely the business arrangement in question, wherein multiple individuals share both the management responsibilities and full liability for the actions of the group.
Step-by-step explanation:
The arrangement described in the student's question is most likely a general partnership. In a general partnership, multiple individuals pool their resources and share the responsibilities of managing the business.
Each partner in a general partnership has full liability for the actions of the other partners, meaning that they can be held personally responsible for any debts or legal actions taken against the partnership.
This type of business structure allows partners to share responsibility and risks, and it may benefit from the complementary skills that each partner brings to the management of the business. However, it also means that each partner must trust the others, as they all share in the liabilities of the partnership.
A relevant example of this could be when partners work together to purchase real estate, such as a multi-family house for investment purposes. They agree to share profits, but they are also agreeing to share any potential losses or legal issues that may arise.
Because of the shared liability and the collective action problems that can occur, it's important for partners to establish clear agreements on management duties and responsibilities.