Sam and Dave Are Going to Open a Sporting Goods

Multiple Choice

Sam and Dave are going to open a sporting goods store. They sign a written limited partnership agreement naming Dave as a limited partner and Sam as the general partner. Sam files a certificate of limited partnership with the state. Sam contributes $100,000 toward the start-up, while Dave contributes $200,000. They agree to split profits evenly because Sam will be working in the store and operating the day-to-day business. About a month after they open, the business is not doing well, so Dave starts becoming more involved. Soon he is requiring that Sam approve all purchases with him, and Dave is actively directing Jack, the sole other employee. One day, Geoff, a customer, is injured when a bowling ball falls off a shelf and shatters his foot. Geoff sues and is awarded a judgment of $1 million.

A) As this was a limited partnership, Sam is liable for $800,000 and Dave is liable for $200,000.
B) Sam and Dave are each liable for up to $500,000.
C) Under the circumstances, Sam and Dave are both jointly and severally liable for the full $1 million.
D) Whoever negligently secured the bowling ball on the shelf is liable for the $1 million liability.