Question

The primary advantage of being a limited partner is:


a. the receipt of tax-free income.

b. the daily control over the business affairs of the partnership.

c. the partner's maximum loss is limited to their capital investment.

d. the lack of any potential financial loss.

e. the partner's active participation in the firm's activities.

Answer 1

Maximum loss limited to their capital investment

Explanation:

• As an investor there is a possibility of both profit and loss. If it is sole proprietorship, the profit or loss will be put on the his / her shoulder.

• In case of limited partner, the advantage is that if there is a loss occurred it will" limit to their capital investment".

• He/she enjoys "protected investments"

• There will not be any huge loss since the capital invested is limited.

• "A company can have more than one limited partner"