Lucky’s Cupcakes, a sole proprietorship, and Mini Cakes, a general par

QUESTION

Lucky’s Cupcakes, a sole proprietorship, and Mini Cakes, a general partnership, intend to merge.

One partner from Mini Cakes is going to step down from handling day-to-day operations but is still going to contribute financial resources to the company. What kind of company will the merged company become? Explain.
What will be an ideal response?

ANSWER

Answer: The new company will be a limited partnership. There will be two general partners, who will share profits, liabilities, and management responsibilities. There will be one limited partner, who will contribute only an investment but will not have any management responsibility or liability.
Explanation: The new company will be a limited partnership. There will be two general partners, who will share profits, liabilities, and management responsibilities. There will be one limited partner, who will contribute only an investment but will not have any management responsibility or liability.