Question

Farah and David decide to form a sports memorabilia retail partnership. They have known each other since business graduate school and have always worked well together on various projects. The business is doing well but cash flow is very tight. Farah takes several calls from vendors asking for payment. He believed David had been paying the bills. When he asks about this, David admits to embezzling from the partnership.

• What liability does Farah face as a result of the theft?
• Are you for or against a partnership? Please explain.

Answer 1

• While partnersships have some clear advantages, it also have potential disadvantages for consideration.one of the major disadvantage is unlimited liablility
• Unlimited liability is the legal obligation of all general partners of the firmfirm for partnerships debts, regardless of which partner incurred them.
• This liability can extend to the partner's personal assets.
• Each partner is equally andand personally liable for all the debts of the partnership.
• Considering the above facts, hence, farah is equally liable for the partnership's debt to vendors,, even though David incurred them.
• This major drawback of partnership firm is solved by introducing an LLP (limited liability partnership firm), in which one parner can be general and all others can be limited partners, I. E,, their personal assets were not held for firm's debt.