North Carolina Building Contractor License Practice Exam

Which individuals have liability restricted to the amount of their investment and have no managerial decision-making power?

1. General partners

2. Corporations

3. Limited partners

4. Joint ventures

The correct answer is: Limited partners

Limited partners are individuals who have capital invested in a partnership but do not have a role in managing the business. This arrangement allows them to limit their financial risk to the amount they have invested in the partnership. They benefit from the profits generated by the business, but their lack of involvement in day-to-day operations means they cannot make managerial decisions. This is an important aspect of limited partnerships, as it provides a way for investors to participate in business ventures with reduced liability. In contrast, general partners have full managerial power and can be held personally liable for the debts and obligations of the partnership, exposing them to greater risk. Corporations are separate legal entities that offer limited liability to their shareholders, but shareholders do have a say in major decisions, especially during annual meetings or through voting on key issues. Joint ventures are temporary partnerships where each partner typically shares management responsibilities and liabilities, which further distinguishes them from limited partners.