Which of the following statements is CORRECT?
A) In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business.
B) Attracting large amounts of capital is more difficult for partnerships than for corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests.
C) A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company.
D) The limited partners in a limited partnership have voting control, while the general partner has operating control over the business.Also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy.
E) A major disadvantage of all partnerships compared to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itself.

Question

Quizplus · Accepted Answer

Partnerships have unlimited liability, which means that partners are personally responsible for the partnership's debts and obligations. Additionally, partnerships can face difficulties in attracting large amounts of capital due to factors such as the need for reorganization when a partner dies and the illiquidity of partnership interests. Corporations, on the other hand, have limited liability and are able to issue stocks and bonds to raise large amounts of capital.

Which of the Following Statements Is CORRECT