(b) That's wrong. All the partners in a general partnership are jointly liable for the partnership debts and other obligations. However, in New South Wales, Queensland, South Australia, Tasmania, Victoria and Western Australia the relevant legislation also makes provision for a special type of partnership called a limited partnership.

In a limited partnership, a distinction is drawn between what are called general partners and limited partners. The general partners (and there must be at least one of these) manages the business and carries an unlimited personal liability for the business debts, just as in a general partnership. Those persons who join the partnership as limited partners and contribute assets to it, but who do not take any part in the management of the business, are not personally liable for business debts, except to the extent of the assets they have agreed to contribute.

For example, if Edward and Ronnie join together in a limited partnership, with Edward as the general partner, and Ronnie as a limited partner, and Ronnie agrees to contribute $10,000 worth of capital to the business, that amount is the full extent of Ronnie's liability.

The Partnership Acts specify that limited partnerships may have no more than twenty general partners, but they can have any number of limited partners. Limited partnerships are therefore a good way of allowing persons to invest in a business without being involved in its management, or having unlimited personal liability.

Limited partnerships are taxed on the same basis as companies.