Certified Residential Appraiser Practice Exam

What ownership arrangement allows all partners to share in gains and losses while having unlimited personal liability?

1. Cooperative

2. General Partnership

3. Planned Unit Development (PUD)

4. Fee Timesharing

The correct answer is: General Partnership

A general partnership is an ownership arrangement where all partners participate equally in the management of the business and share equally in its gains and losses. This type of partnership does not provide any liability protection; instead, each partner has unlimited personal liability for the debts and obligations of the partnership. This means that if the partnership incurs debt or legal issues, creditors can pursue the personal assets of any partner to satisfy those obligations. This arrangement contrasts sharply with other options. For instance, cooperatives typically limit individual member liability and distribute profits based on usage, rather than equal sharing of gains and losses. A planned unit development (PUD) does not involve the same personal liability context—it's usually a type of housing development with shared ownership of common areas and is governed by specific legal documents. Fee timesharing involves shared ownership of property for vacation use, where liability typically differs and is often structured through a different legal framework. In summary, the general partnership uniquely stands out for its characteristic of shared responsibility and unlimited liability among partners, making it the correct answer.