Paralegal Advanced Competency Exam (PACE) Practice Exam

A limited partner in a partnership is defined by their liability, which is restricted to the extent of their investment in the partnership. This means that a limited partner’s financial risk is limited, providing them protection from the partnership's debts beyond what they have invested. This structure allows individuals to invest in a partnership without assuming the full risks associated with business operation and management.

In contrast, the other choices describe characteristics of a general partner. Unlimited management rights or the ability to make all business decisions and focus on day-to-day operations characterize a general partner's role, which involves both management responsibilities and personal liability for the debts of the partnership. This difference is crucial for understanding the distinct roles and risks associated with limited and general partners in a partnership setting.