Florida Broker Practice Exam

In what scenario is a limited partner in a limited partnership liable for partnership debts?

1. If they actively participate in management

2. If they lend money to the partnership

3. If their name appears in the partnership name

4. Both a and c

The correct answer is: Both a and c

A limited partner in a limited partnership typically enjoys liability protections, meaning their risk of loss is limited to the amount they invested in the partnership. However, there are specific exceptions where a limited partner may become personally liable for partnership debts. When a limited partner actively participates in management, they lose their limited liability status. This is important because limited partners are not supposed to have a role in the day-to-day operations of the business. If they do engage in management activities, they risk being treated as general partners, who have full personal liability for the debts of the partnership. Additionally, if a limited partner's name appears in the partnership name, this can also expose them to liability. This is because the presence of their name can imply to outside parties that they are involved in the management or operations of the partnership, further muddying the lines between a limited partner and a general partner. Therefore, the correct answer reflects both scenarios where a limited partner could incur liability: by participating in management (which breaches their limited partner status) and by having their name in the partnership name (which can mislead creditors and the public regarding their level of involvement).