Paralegal Advanced Competency Exam (PACE) Practice Exam

What is included in the definition of a general partnership?

1. A partnership where partners have limited liability

2. A partnership where management is divided among partners

3. A partnership with shared profits but not losses

4. A partnership that doesn't require any formal agreement

The correct answer is: A partnership where management is divided among partners

A general partnership is defined by the partners' shared responsibility for the management of the business, which is reflected in the division of management among them. In this type of partnership, all partners typically participate in the management of the business, and decisions are made collectively. This collaborative approach allows for shared expertise and resources, which can be beneficial for the success of the partnership. While some partnerships may operate without a formal agreement, this is not a defining characteristic of a general partnership. Instead, the essential element is the shared management and decision-making responsibility among the partners. The other options, which refer to limited liability, handling of profits and losses, and the necessity of formal agreements, do not accurately capture the fundamental aspect of management that characterizes general partnerships.