Which of the following statements best describes partnerships?
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)Partnerships have trouble attracting large capital due to factors such as unlimited liability, and the illiquidity 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)A major disadvantage of all partnerships relative to all corporations is the fact that taxes must be paid by the partners rather than by the firm itself.

Question

Quizplus · Accepted Answer

Partnerships may have difficulty attracting large capital due to several factors, including unlimited liability and the difficulty of transferring partnership interests. Option A is incorrect as general partnerships have unlimited liability, whereas limited partnerships have one or more general partners with unlimited liability and one or more limited partners whose liability is restricted to their investment amount. Option C is incorrect since slow-growth companies may opt to form a partnership or other organizational structure depending on their specific circumstances. Option D is also incorrect since both partnerships and corporations require partners or shareholders to pay taxes on their share of profits.

Which of the Following Statements Best Describes Partnerships