Alice, Betty, and Cathy are interested in forming a business venture. Alice is quite wealthy and is ready to contribute money to the venture. Betty has a degree in business from an excellent university, worked for five years as a manager in a major

Question

corporation, and currently is a leadership/management consultant. Cathy is a scientist who has developed a process that will, according to her, "revolutionize cancer treatment throughout the world." Alice, Betty, and Cathy believe it is in their best interest to form a general partnership. Do you agree? Is there a more appropriate form of business you might recommend?

Answer 1

?The general partnership form is not appropriate because each owner would be liable for all debts of the organization. In light of her wealth, Alice might be particularly troubled with the liability exposure of a general partnership.
The limited partnership form is arguably a preferable choice in this situation. Should the parties choose a limited partnership, Betty (with her business acumen) might be best positioned to serve as the general partner, and Alice and Cathy could be limited partners. Under the Revised Uniform Limited Partnership Act, it is possible that both Alice and Cathy could contribute to the effective management of the firm (by consulting with and advising Betty, the general partner, regarding the partnership business) without losing their limited liability status.