UNIT 2 - Partnerships, Income Tax

Question 1

A man and a woman (‘the partners’) have recently set up a market-stall bakery. The man contributed more capital. The partners agreed that the man would work 8.00am–5.00pm and the woman would work 8.00am–4.00pm, but this was the only aspect of running the business that they expressly agreed. The business satisfies the definition of a partnership under the PA 1890.

Which of the following statements best describes how the partners will share the partnership’s income and capital profits?

A) Capital profits will be shared equally but the man may successfully argue that it is an implied term that income profits will be shared according to how many hours each partner works for the partnership.
B) Capital profits will be shared equally but income profits will be shared according to how many hours each partner works for the partnership.
C) Income and capital profits will be shared according to how many hours each partner works for the partnership.
D) Income and capital profits will be shared according to the partners’ initial capital contributions.
E) Income profits will be shared equally but the man may successfully argue that it is an implied term that the partners own the capital in accordance with their initial capital contributions.

Answer 1

CORRECT ANSWER E - Section 24(1) of the PA 1890 provides that all capital and income profits and losses are shared equally, and that it does not depend on the hours the partner
works – so options A, B and C are wrong. However, it has been established by case law that it can be inferred from a course of conduct that the partners own the capital profits
in unequal shares. Option D is wrong because whilst a court may decide that the partners should share profits according to their initial capital contributions, this would depend on whether the relevant partner’s argument was successful rather than it being an established legal rule.

Question 2

A client is leaving a partnership today. The other partners have removed her name from the letterhead and other documentation and will no longer refer to her as a partner. The client seeks advice on whether she will remain liable for existing and future debts of the partnership.

Which of the following best describes the best advice to the client regarding her liability going forward?

A) She will remain liable for existing partnership debts (unless she enters into a novation agreement with the partnership and its creditors) but will not be liable for future debts as long as she complies with the notice requirements in s 36 PA 1890.
B) Once she has left the partnership, the client will no longer have any liability for any existing or future debts of the partnership.
C) She will remain liable for both existing partnership debts and future partnership debts unless she enters into a novation agreement with the partnership and its creditors.
D) Once she has left the partnership, the client will no longer have any liability for any existing or future debts of the partnership as long as she complies with the notice requirements in s 36 PA 1890.
E) Now that the client’s name has been removed from the partnership’s letterhead and related documentation, she will no longer have any liability for any existing or future debts of the partnership.

Answer 2

CORRECT ANSWER A - Partners cannot escape liability to third parties for debts the partnership entered into while they were a partner unless there is a novation agreement
(s 17 PA 1890). This means that options B, D and E are wrong. The notice requirements in s 36 PA 1890 constitute notice to all existing and future contacts that the partner has left the firm, and complying with s 36 is sufficient notice that the partner has left the firm so will not be liable for any debts the partnership enters into after that date (unless there is evidence of holding out). For this reason, option C is wrong.

Question 3

wo individuals are going into business together as photographers for events such as weddings and large parties. They do not know which business medium to choose. They will have professional indemnity insurance and know that they do not want to expand the business beyond northwest England. They are happy to deal with small amounts
of paperwork and do not mind paying administrative costs associated with running a business. Their solicitor advises them that a limited liability partnership (‘LLP’) would be a good option for them.

Which of the following best describes why an LLP would be advisable rather than a company or general partnership?

A) Because in an LLP, there is no paperwork but the partners will benefit from the advantage of limited liability for the firm’s debts, which is always advisable.
B) Because a photography business may face large liabilities, so they must have a business which benefits from limited liability.
C) Because in an LLP, there is no paperwork and while the partners have unlimited liability for the LLP’s debts, this is not significant here because the partners will have insurance, and this will cover liability for any of the LLP’s debts.
D) Because it combines the advantages of limited liability with small amounts of paperwork, and because they will not be expanding overseas, they do not need the advantage of the medium of a company being well-known.
E) Because it combines the advantage of the prestige of an LLP with small amounts of paperwork and limited liability for the LLP’s debts for anyone who is not a designated member.

Answer 3

CORRECT ANSWER D - A photography business’s most likely liability is a claim for professional negligence (eg photos that are not of the required standard), which will be covered by insurance (so option B is wrong). However, given that the individuals are happy with small amounts of paperwork and administrative costs, they might as well operate as an LLP and take advantage of the benefit of limited liability for the firm’s debts. Companies are better known overseas but they will not be expanding overseas. Option A is wrong because it
does not represent the best advice to the client: it omits the point about not needing the advantage of the medium of a company being well-known and in addition it is not true to say that there is no paperwork for an LLP. Option C is also wrong because it refers to there being no paperwork in an LLP. Option E is wrong because designated members also have limited liability for the firm’s debts. In addition, there is no significant prestige attached to an LLP.

Question 4

A company had total sales in the accounting period ending 31 March 2025 of £2,400,000. The company incurred the following costs during the accounting period:
Costs £335,000
Stock 335,000
Salaries 333,000
Electricity/gas/telephone and rates 98,000
Rent 19,000
Insurance 6,000

The company sold some warehouse premises in June 2024 for £610,000. It purchased them in January 2011 for £360,000.

Which of the following best describes the company’s trading profit for the accounting period?
A) £88,779
B) £2,400,000
C) £791,000
D) £1,609,000
E) £250,000

Answer 4

CORRECT ANSWER D - Trading profit is calculated by subtracting deductible expenditure from sales. The sale of the warehouse is irrelevant for the purposes of calculating trading profit. Here, the listed deductible expenditure adds up to £791,000. Sales of £2.4 million less deductible expenditure of £791,000 = £1,609,000.

Question 5

A large trading company has an accounting period which ends on 31 March. In May 2024
it buys brand new plant and machinery costing £1,000,000. At the start of that financial year it had a pool of plant and machinery worth £500,000. Assume that the company always claims the maximum capital allowances available.

Which ONE of the following statements best describes the capital allowance the company can claim in the accounting period ending 31 March 2025?

A) £1,000,000
B) £1,300,000
C) £90,000
D) £270,000
E) £1,090,000

Answer 5

CORRECT ANSWER E - In the accounting period ending 31 March 2025, the company can claim full expensing of £1,000,000 in relation to the brand new machinery. Note that it could alternatively claim the AIA, but the amount of the deduction would be the same whether it claimed full expensing or the AIA.
It can also claim 18% of the existing pool of £500,000, that is, £90,000.
This gives total capital allowances for the accounting period of £1,000,000 + £90,000 = £1,090,000.

Question 6

In one year, a man receives a salary of £21,335 per annum, interest of £75 from a bank savings account, and £500 of dividends from shares which he owns in a company.
Assumptions: the personal allowance is £12,570; the personal savings allowance is £1,000 and the dividend allowance is £500.

Which of the following best represents his income tax liability for the tax year?

A) £8,765.00
B) £1,753.00
C) £10,840.00
D) £2,168.00
E) £1,153.00

Answer 6

CORRECT ANSWER B - NSNDI income is £21,335. Deduct personal allowance (£12,570) to give taxable income of £8,765. This is all taxed at 20% = £1,753. The interest all falls within the PSA (£1,000), which is taxed at 0%, so there is no tax to pay on this. The dividend income
all falls within the dividend allowance, which is taxed at 0%, so there is no tax to pay on this either.
Note that the £1,753 represents the man’s overall tax liability for the tax year. It will be necessary to allow for any tax deducted at source to calculate the amount of tax still owing.

Question 7

Following an investigation, a client has been informed by HMRC that they are in breach of the general anti-avoidance rule (‘GAAR’). The client does not wish to contest HMRC’s finding.

Which of the following best describes the consequences for the client?

A) HMRC may sue the client for breach of contract for the amount outstanding.
B) HMRC may require the client to pay a fine.
C) HMRC may refer the matter to a tax tribunal.
D) HMRC may issue a written warning to the client.
E) HMRC may request the taxpayer to make just and reasonable adjustments to the amount of tax paid.

Answer 7

CORRECT ANSWER E - There is no contract, so option A is wrong. HMRC has the power to order the just and reasonable adjustments – there is no such thing as a written warning (option D is wrong), no power to impose a fine in these circumstances (option B is wrong) and no need to refer the matter to a tribunal (option C is wrong).

Question 8

Which of these is NOT a category of income for income tax purposes?

A) Non-savings, non-dividend income (‘NSNDI’).
B) Salary income.
C) Savings income.
D) Dividend income.

Answer 8

CORRECT ANSWER B - Salary income is not a category of income. Salary would form part of NSNDI income. NSNDI, savings and dividend income are all recognised categories of income.

Question 9

How is net income calculated for income tax purposes?

A) Separate the different forms of income, and calculate the tax on each type of income at the applicable rate(s) (starting rate, basic rate, higher rate and additional rate).
B) Deduct personal allowances then calculate the total income.
C) Deduct personal allowances then calculate the total income, then deduct any allowable reliefs.
D) Calculate total income then deduct any allowable reliefs.
E) Calculate total income then deduct any allowable reliefs then deduct personal allowances.

Answer 9

CORRECT ANSWER D - Remember that the question is asking for how to calculate net income, and only net income. The other options generally relate to other stages of the income tax calculation but not solely net income.

To calculate the income tax payable, you must follow these steps:
Step 1: Calculate the total income
Step 2: Deduct any allowable reliefs
The resulting sum is net income
Step 3: Deduct any personal allowances
The resulting sum is taxable income
Step 4: Separate NSNDI, savings income and dividend income, and calculate the tax on each type of income at the applicable rate(s) (starting rate, basic rate, higher rate and additional rate)
Step 5: Add together the amounts of tax from Step 4 to give the overall income tax liability.

Question 10

Which of these options best describes deductible expenditure when calculating trading profit?

A) Deductible expenditure must be income in nature; wholly and exclusively for the purpose of the trade and not statute barred.
B) Deductible expenditure must be of a recurring nature.
C) Deductible expenditure must be from dividends or savings.
D) Deductible expenditure must be incurred in the last 18 months.
E) Deductible expenditure must be offset against the subsequent year’s profits.

Answer 10

CORRECT ANSWER A - Deductible expenditure must be expenditure which is incurred on something which is income in nature, which has been incurred “wholly and exclusively” for the trade and deduction of which is not prohibited by statute (Income Tax (Trading and Other Income) Act 2005 s34 and Corporation Tax Act 2009 part 3 ch 4).

Whether it is “income in nature” often boils down to the question “was the expenditure on an item that recurs, enabling the trader to sell their goods or services?”. Things like stock, salaries and electricity bills are all deductible expenditure. If the expenditure is of a “once and for all” nature - like buying an office then that will be capital expenditure and not income in nature. Similarly, things that are not forever but will not need to be bought again in the foreseeable future are also capital - for example furniture.

Wholly and exclusively for the purpose of the trade means that the only reason you bought the thing was for the trade. If you buy food because you are on a business trip, it is not “wholly and exclusively” for the purposes of trade because you would have to eat in any event.
Option B had some merit as recurrence has a large part to play in whether something is income in nature but it is only part of a larger test.

Options C, D and E are not part of deductible expenditure at all and there is no merit to them.

Question 11

Which of the following best describes the PAYE system?

A) A way for employers to pay an employee’s taxes directly to HMRC.
B) A system for ensuring foreign nationals pay appropriate taxes to HMRC.
C) A mutual tax treaty with the United States of America.
D) A system of saving that does not incur tax on the interest earned.
E )A system for determining an individual’s annual allowance.

Answer 11

CORRECT ANSWER A - The Pay As You Earn (PAYE) system is a method of paying income tax and national insurance contributions. The employer deducts tax and national insurance contributions from an employee’s wages or occupational pension before paying it to the employee.

Question 12

How does the personal allowance change after a person earns over £100,000 a year?

A) It does not change.
B) The personal allowance is reduced by £1 for every £10 of income above the £100,000 limit.
C) Once a taxpayer’s income reaches £100,000, they will not have a personal allowance.
D) The personal allowance is reduced by £1 for every £2 of income above the £100,000 limit.
E) Once a taxpayer’s income reaches £120,000, they will not have a personal allowance.

Answer 12

CORRECT ANSWER D - Where the taxpayer’s income exceeds £100,000, the personal allowance is reduced by £1 for every £2 of income above the £100,000 limit. So, a taxpayer earning a net income of £102,000 will benefit from a personal allowance of £11,570 – this is £1,000 less than those earning £100,000, because every £2,000 earned over £100,000 results in a reduction of £1,000 to the personal allowance.

Once a taxpayer’s income reaches £125,140 (option e incorrectly refers to £120,000), they will not have a personal allowance because their personal allowance will have been reduced to zero by this point.

Question 13

A person has a salary of £210,000. Because her taxable income exceeds £125,140, she is an additional rate taxpayer. She has no relevant allowable reliefs.
She has a building society savings account and receives £650 annual interest from it.

How will the personal savings allowance work in relation to the person’s building society interest?

A) The first £1,000 of interest is tax free for everyone and therefore Person A’s interest falls entirely within the PSA - there is no additional tax to pay.
B) As an additional rate taxpayer, she has no PSA. The whole £650 interest is taxable savings income and will be taxed at 45%.
C) As a higher rate taxpayer the £650 will be taxed at the higher rate of 40%.
D) As a higher rate taxpayer the £500 PSA will apply. The remaining £150 will be taxed at the higher rate of 40%.
E) As a higher rate taxpayer the PSA is £1,000. The person’s interest falls entirely within the PSA - there is no additional tax to pay.

Answer 13

CORRECT ANSWER B - The PSA can be set against savings income, so that up to the first £1,000 of savings income will be tax free.
The amount of the PSA to which a taxpayer is entitled depends on whether the taxpayer is a basic or higher rate taxpayer. This is calculated by reference to the taxpayer’s taxable income. Here the person is an additional rate taxpayer and additional rate taxpayers do not receive a PSA.

Question 14

What are the main bands of NSNDI income tax in the tax year 2023/24?

A) Basic Rate 20%, Higher Rate 32.5%, Additional Rate 45%
B) Basic Rate 20%, Higher Rate 40%, Additional Rate 45%
C) Starting Rate 19%, Higher Rate 40%, Additional Rate 45%
D) Starting Rate 19%, Higher Rate 32.5%, Additional Rate 50%
E) Starting Rate 19%, Basic Rate 20%, Higher Rate 32.5%, Additional Rate 50%

Answer 14

CORRECT ANSWER B - NSNDI is taxed first. Once you have worked out what NSNDI is, you must tax it at the appropriate rates. The basic rate is 20%, the higher rate 40%, and the additional rate 45%

Question 15

A person has an income of £70,500, of which £53,500 is NSNDI and £17,000 is dividend income. They have no savings income. They are a higher rate taxpayer.

For the tax year 2023/24:
Personal Allowance: £12,570
Income Limit for Personal Allowance: £100,000
Basic rate in England and Northern Ireland is 20% - Up to £37,700
Higher rate in England and Northern Ireland is 40% - £37,701 to £125,140
Additional rate in England and Northern Ireland is 45% - over £125,140
Dividend Allowance: £1,000
Dividend basic rate in England and Northern Ireland is 8.75% - Up to £37,700
Dividend higher rate in England and Northern Ireland is 33.75% - £37,701 to £125,140
Dividend additional rate in England and Northern Ireland is 39.35% - over £125,140

What is his liability to tax on the dividend income only?

A) No tax to pay
B) £14,232
C) £14,570
D) £5,400
E) £4,225

Answer 15

CORRECT ANSWER D - remember that it is only the dividend income we are interested in for this answer.

Their income is £70,500, of which £53,500 is NSNDI and £17,000 is dividend income. They have no savings income. They are a higher rate taxpayer.

The person is entitled to a dividend allowance of £1,000, which is taxed at 0%. All of their remaining taxable dividend income falls within the higher rate of 33.75% of the remaining £16,000 (£5,400).

This is calculated below. Part A of the calculation is only to determine which rate will be paid on the dividend income. Part A can be approximated in your head as the basic rate stops at £50,000 (approx) of income (£12,570 personal allowance + £37,700 basic rate) so it is clear this will be at the higher rate without doing any complex maths.

on the NSNDI:
at a rate of 0% on the first £12,570 (personal allowance); and
at the basic rate of 20% on the first £37,700, (£7,540); and
at the higher rate of 40% on the remaining £3,230 (£1,292); and

on the remaining ‘top slice’ of dividend income (£17,000),
at a rate of 0% on the first £1,000 (dividend allowance); and
at the dividend higher rate of 33.75% of the remaining £16,000 (£5,400).

Question 16

A partnership was formed in March 2019 with four partners, Partners A, B C and D. The partnership has a partnership agreement that provided for a number of things, one of those things was that the partnership would continue so long as two partners remained and another thing was that partners who have left are indemnified by all the other partners against any future claims relating to the partnership.

Partner B left the partnership and was replaced by Partner E on 1 August 2022. On 1 August 2022 Partner B notified all existing customers and put an advert in the London Gazette. Also on 1 August 2022 Partner B’s name was taken off all websites, letterheads and similar places where partners’ names were listed.

On 1 May 2019 the partnership entered into a contract with a supplier. On 1 Nov 2022 the supplier announced a breach of contract and on 21 November 2022 the supplier issued proceedings against the partnership.

Which of the following best describes the liability of Partner B?

A) Partner B is not liable for the outstanding debt because the breach was only after they had left the partnership.
B) Partner B is not liable for the outstanding debt because they were no longer a partner when the proceedings were started.
C) Partner B is liable for the whole outstanding debt but has a right to be indemnified by Partners A, C, D and E.
D) Partner B is liable for the whole outstanding debt.
E) Partner B is liable for the outstanding debt but only because they did not notify existing customers before 1 August 2020.

Answer 16

CORRECT ANSWER C - At the time the contract was entered into Partner B was a partner (s9 PA1890). This is the crucial piece of information. The date of the alleged breach or the date of proceedings are irrelevant (hence options A and B are wrong). It is also important that the partnership agreement contains a clause indemnifying partners who have left (so option D does not best describe the situation). This does not stop Partner B being sued by the supplier but provided the other partners are not bankrupt, Partner B should get their money back.

Option E is wrong - there is no requirement to notify existing customers before a partner leaves the partnership.

Question 17

A partnership has 16 partners, one of whom has stolen money from the partnership and been convicted of fraud for the same offence. The other 15 partners are all keen to expel the fraudulent partner. The partnership has no partnership agreement.

Can the remaining 15 partners expel the fraudulent partner?

A) No, there is no right to expel a partner, regardless of the reason.
B) No, unless the crime of which the partner has been convicted carries a mandatory life sentence.
C) Yes, stealing money from the partnership is a permitted reason for expulsion.
D) Yes, being convicted of a crime against the partnership is a permitted reason for expulsion.
E) Yes, being convicted of any crime in the Crown Court is a permitted reason for expulsion.

Answer 17

CORRECT ANSWER A - S25 PA1890 makes it clear that there is no right to expel a partner unless you have a partnership agreement which grants the right to expel. It doesn’t matter how serious the crime is, who the victim was or indeed if it is crime at all.

In the very unusual circumstance where a partner votes for their own expulsion (unanimous vote), then it is a resignation/retirement as they are voluntarily leaving.

Question 18

In a general partnership, there are 5 employees and 10 partners. There is no express partnership agreement. One of the partners would like to buy a pencil costing 25 pence.

Is the partner permitted to buy a pencil on behalf of the partnership without consulting the other partners?

A. Yes, because a partner can buy a 25p pencil without authorisation from anyone else.
B. Yes, because a partner or an employee can buy a 25p pencil without authorisation from anyone else
C. No, they must hold a meeting of the partners and vote on buying the pencil. A majority of partners must vote in favour.
D. No, they must hold a meeting of the partners and vote on buying the pencil. At least one other partner must vote in favour.
E. No, they must hold a meeting of the partners and vote on buying the pencil. All the other partners must vote in favour.

Answer 18

CORRECT ANSWER C - The default position is that ordinary matters of the partnership are decided by majority (per s24(8)). There are only three decisions under the Act that require unanimity: i. varying the terms of the partnership (s19), ii. introducing a new partner (s24(7)), and iii. changing the nature of the partnership (s24(8)).
Buying a pencil, even though the amount is trivial, is dealt with in the same way as any other contract. It requires a majority of the partners to vote in favour. Of course, this is unlikely to be practical and a written partnership agreement would be a much better solution.
Options A and B are wrong because without some form of agreement, or perhaps a course of dealings, all contracts will require a majority of the partners to agree.
Options D and E are wrong because the number of partners who must vote in favour is wrong. A majority vote is required.

Question 19

In a general partnership, there are five employees and 10 partners. There is no express partnership agreement. One of the partners would like to propose a new person, their brother, to join the partnership. The brother is willing and able to be a partner.
Can a new partner be introduced without consulting the other partners?
A. Yes, because a new partner can be introduced as long as the new partner consents in writing and they are willing to accept unlimited liability.
B. Yes, because a member of the immediate family of an existing partner may automatically join if proposed by their relative.
C. Yes, they must hold a meeting of the partners but the outcome of the vote is irrelevant. There is a duty to notify the other partners but not to consult them.
D. No, they must hold a meeting of the partners and vote on the introduction of the new partner. A majority of the partners must vote in favour.
E. No, they must hold a meeting of the partners and vote on the introduction of the new partner. All of the existing partners must vote in favour.

Answer 19

CORRECT ANSWER E - The introduction of a new partner, under s24(7) PA 1890, is one of the three votes which require unanimity instead of majority. (See Q2 above.)
Option A is wrong because the incoming partner’s consent is not the main issue here, the other partners must be consulted. Similarly option B is also wrong, there is no exemption for immediate family members.
Options C and D are wrong but they do get closer to the right answer. However they do not properly outline the position as regards unanimous consent.

Question 20

A general partnership has been in existence for 45 years. It has 60 partners and 450 employees. It has an annual turnover of £120 million. It does not have an express partnership agreement. One of the partners, who deals with client accounts, has been at the partnership for 20 years and she decides to retire (she is 65 years old).
What will be the biggest commercial consequence of her retirement as far as the partnership is concerned?
A. The partnership will dissolve.
B. The loss of an employee with 20 years’ experience and personal contacts in client accounts is often damaging to a business.
C. Taking on a new partner to replace the outgoing partner is difficult to accomplish as all 59 remaining partners and the incoming member must agree.
D. The pension of an employee with 20 years’ service will be high and a significant financial drain on the business.
E. The remaining partners will be compelled to enter into an express partnership agreement.

Answer 20

CORRECT ANSWER A - Although it seems drastic, the partnership will, in theory at least, dissolve and sell off all its assets. When a partner gives notice that they wish to leave, then by reference to s26(1) Partnership Act 1890 the partnership will end, unless there is an express partnership agreement that says otherwise.
In reality, a new partnership may well be formed by the remaining partners buying the old partnership’s assets - assuming that the remaining partners can afford to buy the old partner out. However, in this hypothetical example, the old partnership has effectively dissolved and a new one has formed.
Options B and C are important considerations and correctly describe the situation, however neither of them are as crucial as the whole partnership dissolving.
Option D may or may not be true depending on a range of factors. In any case, it is not as much of a commercial consequence as option A.
Option E is not correct, the partners will not be compelled to enter into an express agreement, although entering into a written partnership agreement is a good idea for almost all partnerships.

Question 21

A partner of a general partnership ordered a tanning sunbed for the partnership costing £7,000. They signed the invoice declaring they were a partner and signing on behalf of the partnership. The other partners are against the purchase and have always made their opposition clear. The sunbed seller had no way of knowing of the other partners’ opposition. The partnership does not have an express partnership agreement. The partnership builds small and medium sized sailing boats, with a turnover of £4 million a year.
Is the partnership bound by the purchase of the sunbed?
A. Yes, because the partner signed the invoice declaring themselves to be a partner and signing on behalf of the partnership.
B. Yes, because the transaction is one you expect a single partner to have the authority to make.
C. No, because the transaction is not one you would expect a single partner to have the authority to make.
D. No, because the contract does not relate to the type of business of the partnership.
E. No, because the other partners had made their opposition to the purchase clear and there was no authority to purchase.

Answer 21

CORRECT ANSWER D - is the correct answer. Sunbeds do not relate to the business of building small and medium sized sailing boats.
It is clear that the partner did not have actual authority to enter into the contract so we must look to the apparent authority test which has 4 parts.
1. Does it relate to the type of business carried out by the partnership? (Objective test)

Here it does not relate to the business of building boats. So the answer is no for this part.
2. Is the transaction one which a single partner in such a firm would usually have the authority to act? (Objective test)
Yes, the amount is £7,000 which is not an unusually large transaction for a business.
3. Did the other party to the transaction know that the partner lacked actual authority? (Subjective test)
No. The seller did not know of the opposition of the other partners.
4. Did the other party know or believe that the person was a partner at the time of the transaction? (Subjective test)
Yes. They signed on behalf of the partnership and declared that they were a partner.
So, the conclusion must be that as all four parts of the test have not been satisfied, the partnership is not bound by this purchase. Of course, the partner remains personally liable for the purchase.