Colleen is admitted to the partnership of Elmore & Monticello and makes an initial capital contribution of $10,000.Two years later,when liabilities of the partnership exceed its assets by $20,000,the firm is dissolved.Paul had loaned the firm $5,000 six months before Colleen was admitted;Scott had loaned the firm $8,000 three months after Colleen was admitted.Colleen has:
A) no liability to Paul.
B) liability to Paul to the extent of her capital contribution and is personally liable to Scott.
C) no liability to Scott.
D) liability to Paul and Scott only to the extent of her capital contribution.

Question

Quizplus · Accepted Answer

As a partner, Colleen is liable for the partnership's debts and obligations, including any loans taken out by the firm. However, her liability is limited to the extent of her capital contribution. Therefore, Colleen is liable to Paul to the extent of her capital contribution ($10,000) and is personally liable to Scott because his loan was taken out after she became a partner. Colleen is not liable for the partnership's debts that arose before she became a partner, so she has no liability to Scott for the loan he made three months after she joined the partnership.

Colleen Is Admitted to the Partnership of Elmore & Monticello