Which of the following is a TRUE statement about the characteristics of partnerships?
A)Limited partners have mutual agency and unlimited liability for the partnership's debts.
B)General partners have mutual agency and limited liability for the partnership's debts.
C)Net income and loss of the partnership "flows through" to the partners.
D)The partnership agreement must be in writing.

Question

Quizplus · Accepted Answer

One of the main characteristics of partnerships is that the net income and loss of the partnership "flows through" to the partners. This means that the partnership itself does not pay income tax, but the partners report their share of the income or loss on their individual tax returns. Option A is incorrect because limited partners have limited liability for the partnership's debts, while general partners have unlimited liability. Option B is incorrect because general partners have unlimited liability for the partnership's debts, not limited liability. Option D is incorrect because while it is recommended to have a partnership agreement in writing, it is not a legal requirement in many jurisdictions.

Which of the Following Is a TRUE Statement About the Characteristics