What is a partnership, and how is liability typically shared?

• A. A business owned by two or more people; partners usually share liability, often jointly and severally.
• B. A business owned by one person with unlimited liability.
• C. A company with limited liability; shareholders' liability is limited.
• D. A nonprofit organization.

Answer: (A)

A partnership is a business owned by two or more people, and liability is shared among the partners. In a typical partnership, partners are personally responsible for the debts and obligations of the business. This is often described as joint and several liability, meaning a creditor can claim the full amount from any one partner, who then has the right to seek contribution from the others. This setup reflects the shared ownership and decision-making in partnerships and differs from other structures: a business owned by one person carries unlimited personal liability for that owner; a company with limited liability limits shareholders’ liability to their investment; and a nonprofit organization doesn’t have owners in the same sense and is oriented around a mission rather than profit distribution.