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Questions and Answers
What is a fundamental characteristic of a partnership?
What is a fundamental characteristic of a partnership?
- Owned by two or more individuals (correct)
- Owned solely by one individual
- Beneficial for only one partner
- Requires a formal contract to begin
Which of the following is an advantage of forming a partnership?
Which of the following is an advantage of forming a partnership?
- Higher capital due to multiple contributions (correct)
- Limited decision-making authority
- Mandatory formal meetings are required
- Unrestricted personal liability
What is one significant disadvantage of a partnership?
What is one significant disadvantage of a partnership?
- Shared responsibility for decision-making
- Individual recognition in profits
- Limited access to funding sources
- A partner can be held liable for another's actions (correct)
How are profits typically handled in a partnership?
How are profits typically handled in a partnership?
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What can significantly undermine a partnership's success?
What can significantly undermine a partnership's success?
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Study Notes
Partnership Overview
- A partnership is owned by two or more individuals, known as partners.
- Profits from the partnership are distributed among partners according to a pre-agreed arrangement.
Advantages of Partnership
- Increased capital availability due to combined contributions from multiple partners.
- Easier management and operations similar to a sole proprietorship, allowing for streamlined decision-making.
Disadvantages of Partnership
- Profit sharing can lead to reduced individual income, as profits are split among partners.
- Misunderstandings or conflicts can jeopardize negotiations and overall partnership effectiveness.
- Partners may be held liable for the actions and decisions of other partners, potentially risking personal assets.
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