Question

Which one of the following statemernts concerning a partnership is true? Select one: O a. A partnership terminates at the death of any partner. O b. Income from a limited partnership is taxed as corporate income. O c. A primary advantage of a partnership is the ease of transferring ownership. O d. Limited partners in a limited partnership should be actively involved in management decision e. Under a general partnership, only the key partner is personally liable for the business debts.

Answer 1

Answer: Option-(a): Partnership terminates at the death of any partner. Partnership is a business setup whereby a group of individuals join their hands and enter into an agreement with the intention to run a commercial activity to earn profit and share the profit among them at an agreed ratio or equally depending on the partnership agreement. In general partnership setup, the managing partner actively engage in businessiies but all partners have equal rights in the partnership firm. In other words, each partner is an agent to other partners of the partnership and the liability is unlimited so that when the partnership makes any default, each partner is personaly responsible to settle the same. There is an another partnership setup called limited liability partnership whereby limited partners are responsible only to the extent of capital of the partner that is invested in the partnership firm whereas responsibility of the general partner still continues to be unlimited. In the limited partnership, limited partners provide money and they don't help run the partnership business. The advantage they have is that they get limited liability of capital that they've contributed to the limited partnership. Partnership agreement specifies how new partners are brought in, how the partnership is going to be terminated if a partner gets killed or dies or something happens. So, Option-(a) is correct.