When a partner is added to a partnership, which of the following typically occurs?

• A. The new partner is not liable for any of the partnership's existing obligations.
• B. The new partner contributes assets and receives an ownership interest in the partnership.
• C. The partnership is automatically dissolved and must be reformed.
• D. Existing partners are required to sell all of their interests to the new partner.

Answer: (B)

Verified step by step guidance

1. Understand the concept of partnership: A partnership is a business structure where two or more individuals share ownership, profits, and liabilities. Adding a new partner involves changes to the partnership agreement.
2. Review the legal implications: When a new partner joins, they typically contribute assets (cash, property, or other resources) to the partnership and receive an ownership interest. However, the new partner becomes liable for the partnership's obligations moving forward, but not retroactively for existing obligations unless agreed otherwise.
3. Analyze the dissolution aspect: Adding a new partner does not automatically dissolve the partnership. Instead, the partnership agreement is amended to include the new partner's terms and contributions.
4. Clarify the ownership transfer: Existing partners are not required to sell all their interests to the new partner. Instead, the new partner's ownership interest is determined based on their contribution and the agreed terms in the partnership agreement.
5. Summarize the correct answer: The correct answer is that the new partner contributes assets and receives an ownership interest in the partnership. This process involves amending the partnership agreement and does not require dissolution or complete transfer of ownership from existing partners.