Contractor License Practice Exam

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Prepare for the Contractor License Exam with comprehensive quizzes. Study with multiple choice questions, flashcards, and detailed explanations to ensure you're ready for success on exam day!

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In a general partnership, is each partner liable for the company's debts in proportion to their ownership?

True
False
Only for certain debts
Depends on the partnership agreement

The correct answer is: False

In a general partnership, each partner is not liable for the company's debts in proportion to their ownership but rather has joint and several liability for the entire amount of the partnership's debts. This means that each partner can be held responsible for the total amount of the partnership's debts, regardless of their individual ownership stake. If one partner fails to pay their portion, creditors can pursue any of the other partners for the full amount owed. This liability structure is a significant feature of general partnerships, as it emphasizes a mutual responsibility among partners rather than a division based on ownership percentages. Thus, it's important for partners to vet each other carefully before entering a partnership. While it's true that certain partnership agreements might outline different liability structures or stipulate specific terms, the default legal position under partnership law indicates that liability is not proportional but rather collective, aligning with the nature of general partnerships.