Certified Residential Appraiser Practice Exam

In which form of partnership do partners share equally in both responsibility and liability?

1. Limited Partnership

2. General Partnership

3. Sole Proprietorship

4. Joint Tenancy

The correct answer is: General Partnership

In a general partnership, all partners share equally in both responsibility and liability. This structure means that each partner has the authority to make decisions for the partnership and is jointly responsible for the obligations and debts incurred by the partnership. This equality in responsibility fosters a collaborative environment where all partners have a stake in the success of the business and are equally liable for any financial or legal issues. It also means that if the partnership incurs debt or faces legal action, all partners’ personal assets could potentially be at risk, not just those of the partner who made a particular decision or engaged in a specific action. In contrast, a limited partnership involves both general partners, who manage the business and have full liability, and limited partners, who typically contribute capital but have limited liability and do not participate in day-to-day management. A sole proprietorship is owned and run by a single individual who bears full responsibility for the business, while joint tenancy refers to a form of ownership of property, not a partnership structure.