Paralegal Advanced Competency Exam (PACE) Practice Exam

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Prepare for the Paralegal Advanced Competency Exam with confidence. Enhance your knowledge with a range of quizzes, multiple choice questions, and detailed explanations. Equip yourself with the skills necessary to excel in your paralegal career!

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How does a Limited Partnership differ from a general partnership?

It has no limit on the number of partners
It allows one or more partners to have limited liability
It requires all partners to manage the business
It is exclusively for corporate entities

The correct answer is: It allows one or more partners to have limited liability

A Limited Partnership differs from a general partnership primarily in the structure of liability and management responsibilities. In a Limited Partnership, there are two types of partners: general partners and limited partners. General partners manage the business and are personally liable for the debts and obligations of the partnership. In contrast, limited partners contribute capital and receive income without being involved in day-to-day management, and their liability is limited to the amount of their investment in the partnership. This structure offers limited liability to the limited partners, protecting their personal assets in case the partnership faces legal issues or financial debt. This distinction is crucial for those who wish to invest in a business opportunity without taking on the full risks associated with general partnership decisions and liabilities. The other options do not correctly describe the distinguishing features of a Limited Partnership. For instance, there can be limits on the number of partners in a Limited Partnership depending on state laws, and it does not require all partners to manage the business, as limited partners do not take part in management. Lastly, a Limited Partnership is not exclusively for corporate entities; it can comprise individuals as well.