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JAMB Principles of Accounts 1995 Question 38

Question 38

Partnership Admission, Retirement and Dissolution

The conversion of a partnership business into a limited liability company affords the

  1. A.general partners the chance of enjoying the limited liability protection
  2. B.limited liability partners the chance of enjoying the limited liability protection
  3. C.creditors the chance of enjoying the limited liability protection
  4. D.debtors the chance of enjoying the limited liability protection.
Show the answer and explanation

Answer: A (general partners the chance of enjoying the limited liability protection)

Explanation

General partners have unlimited liability; once the firm becomes a limited company, their liability is limited to their shares.