National Occupational Competency Testing Institute (NOCTI) Business Practice Exam

Which type of partnership involves at least one general partner and one limited partner?

1. Sole proprietorship

2. General partnership

3. Limited partnership

4. Limited liability partnership

The correct answer is: Limited partnership

A limited partnership is characterized by the presence of at least one general partner and one limited partner. The general partner has unlimited liability and is responsible for managing the operations of the business, while the limited partner's liability is restricted to the amount they invested in the partnership and does not participate in the day-to-day management. This structure allows for investment in the partnership without the limited partner taking on the full risks associated with the business's operations. In contrast, a sole proprietorship involves only one individual who has full control and unlimited liability for the business. A general partnership comprises two or more general partners who share responsibilities and liabilities equally among themselves, without the existence of limited partners. Lastly, a limited liability partnership offers some degree of liability protection to all partners, but does not involve the same structure of having general and limited partners as seen in a limited partnership.