Frank Asked Matt to Join Him in a Business Venture

question 145

Multiple Choice

Frank asked Matt to join him in a business venture. Matt has heard that partnership could result in some harsh consequences. Which of the following statements that Matt has heard about the liability of partners is false?

• A) A partner is an agent for the firm and the other partner, and thus Matt would be liable for a contract made by Frank on behalf of the partnership if the partnership funds could not cover it.
• B) Matt could be liable for losses suffered by a client whose funds were misappropriated by Frank even if he (Matt) were not aware of the misappropriation and had no part in it.
• C) A partner is liable to the full extent of his personal fortune if an employee of the firm was negligent in the course of his duties and there were insufficient partnership funds to cover the resulting loss.
• D) A partner is not liable for any partnership debt that was incurred after he left as long as he gave notice in writing to his partner that he was retiring from the partnership.
• E) A partner has unlimited liability for any loss suffered by the partnership because of a negligent act by one of the partners if the partnership funds are insufficient to cover the loss.

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Definitions:

Divesting

The process of selling off subsidiary business interests or investments, typically to refocus core activities or raise capital.

Compensating

Providing something, typically money, to make up for a loss, damage, or inconvenience caused.

Acquiring

The process of obtaining ownership or control of something, often referenced in the context of corporate takeovers or purchasing assets.