In which structure may one or more partners be strictly financial investors?

In which structure may one or more partners be strictly financial investors?

• A. Limited Partnership
• B. General Partnership
• C. Cooperative
• D. Corporation

Answer: (A)

In a limited partnership, there are two roles: general partners who run the business and bear unlimited liability, and limited partners who contribute capital but do not participate in management. The limited partners’ liability is limited to their investment, so they can be strictly financial investors with no active role. This setup is specifically designed to bring in passive investors while preserving control with the general partners. General partnerships typically involve all partners in management with shared liability, so they aren’t suited for strictly passive investors. Cooperatives are owned by members for mutual benefit and services, not solely by financial investors. Corporations operate as separate entities with shareholders rather than partners, so the term “partners” doesn’t apply in the same way. Therefore, the structure that best fits one or more strictly financial investors is the limited partnership.

In a limited partnership, there are two roles: general partners who run the business and bear unlimited liability, and limited partners who contribute capital but do not participate in management. The limited partners’ liability is limited to their investment, so they can be strictly financial investors with no active role. This setup is specifically designed to bring in passive investors while preserving control with the general partners.

General partnerships typically involve all partners in management with shared liability, so they aren’t suited for strictly passive investors. Cooperatives are owned by members for mutual benefit and services, not solely by financial investors. Corporations operate as separate entities with shareholders rather than partners, so the term “partners” doesn’t apply in the same way. Therefore, the structure that best fits one or more strictly financial investors is the limited partnership.