By advising flamel and hiring the advertising agency

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Reference no: EM132264608

Nicolas Flamel formed a limited partnership with Tom Riddle, to open a restaurant. Mr. Flamel was the general partner and owned 75 percent of the business. Mr. Riddle, with 25 percent ownership, was the limited partner and invested $100K. After one year, difficulties in the restaurant's operation caused business to drop off, and Mr. Flamel called Mr. Riddle for advice.

After hearing of the difficulties, and concerned with the security of his investment, Mr. Riddle visited the operation. Upon observing the operation, the partners decided to launch a television ad campaign to boost sales. Mr. Riddle made the campaign with the help of Brandon Advertising and Video, an advertising agency.

Despite an increase in sales, volume continued to decline, & 3 months after the ad campaign launched, the restaurant closed. Total debts at the time the restaurant closed equaled $400K, with assets of the partnership only being $200K. Included in the debt was $150K owed to the advertising agency. The agency sought payment directly from Mr. Riddle.

Mr. Riddle claimed that his liability was limited to the $100K he had invested in the business, and refused to pay any additional money. The Brandon Advertising Agency sued the limited partnership, as well as Flamel and Tom individually.

1. By advising Flamel and hiring the advertising agency, did Mr. Riddle forfeit his limited partner status? Why or Why not?

2. Is Mr. Riddle liable for the outstanding debts of the limited partnership? Why or why not?

Reference no: EM132264608

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