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A partner in an unregistered partnership firm worries about being personally liable beyond his investment. Comparing forms on the "degree of risk and liability" factor, which statement is consistent with the lesson?
Answer & Solution
Correct answer: A.
1. The lesson treats risk and liability as the sixth factor.
2. In a partnership firm, partners are individually and jointly liable for firm debts.
3. In a company or LLP, creditors can reach only the entity assets and the agreed contribution.
4. A member cannot be forced to put in more than that agreed contribution.
5. So the partner here has reason to worry; LLP or company offers a stronger liability shield.
_Source: ICSI CS Executive Paper 3 (Setting up of Business Entities and Closure) — Lesson 1: Choice of Business Organisation, pp. 2-11._
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