Bob, Frank and Jane are equal partners in a lawn-care business. Frank and Jane wanted the...

Bob, Frank and Jane are equal partners in a lawn-care business. Frank and Jane wanted the partnership to borrow some money from the bank to buy more equipment for the business. Bob was against the idea. When called to a vote, Frank and Jane voted yes. Bob voted no.

Will Bob be held responsible on the loan? Can Frank and Jane exclude Bob from the loan proceeds? If the business fails, who can the lender sue Bob?

How has this unit and Bob's dilemma influenced your thoughts about partnerships as a business structure? Do partnerships represent a greater risk than a sole proprietorship? Why or why not?

Expert Solution

Bob being a partner in the partnership will be held liable for the loan or any liability to the extent of his share in the partnership. No it will be not possible for other partners to exclude Bob from the loan proceeds. The lender can definitely sue the partnership to recover the loan and since Bob is a partner, he will also be a party to the litigation.

The partnership still remains a good business structure since it enables fund raising through leveraging multiple resources and it also spreads liability across partners. Sole proprietorship still remains more risky since there is personal and unlimited liability for any business failure.

keosha answered 2 years ago

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