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Tax Advantage and Disadvantages of Partnerships Quiz

12 Questions

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Tax Advantage and Disadvantages of Partnerships Quiz

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Questions and Answers

What is typically covered in a partnership agreement?

Provisions for hiring specialized management

Methods of settling disputes through arbitration

Terms of dissolution of the business

Determining the value of a departing partner's interest (correct)

Which aspect is NOT usually included in partnership agreements?

Managing powers and work responsibilities of each partner

Distribution of profits and losses

Provisions for expelling a partner

Methods of transferring ownership (correct)

In a partnership, what determines the liability of each partner?

Length of the partnership agreement

Their shareholdings in the business (correct)

Ease of expansion

Their ability to hire specialized management

What is one advantage of corporations compared to partnerships?

Ease of transferring ownership Signup and view all the answers

Which disadvantage of partnerships is related to the termination of the business when a partner leaves or passes away?

Limited life Signup and view all the answers

What does a partnership agreement aim to prevent or minimize?

Potential conflict between partners Signup and view all the answers

In a limited partnership, the liability of one or more partners is limited to what?

The amount of assets invested in the business Signup and view all the answers

What potential area of disagreement between partners is related to decisions on credit extensions and granting additional benefits to employees?

Potential conflict between partners Signup and view all the answers

What is a key advantage of a sole proprietorship in terms of profit distribution?

Profits are distributed solely to the single proprietor Signup and view all the answers

How are government regulations different for sole proprietorships compared to partnerships and corporations?

Sole proprietorships have fewer regulations to comply with Signup and view all the answers

What is a disadvantage of a sole proprietorship related to raising additional capital?

Challenges in raising additional funds Signup and view all the answers

How is the net income of a sole proprietorship treated for taxation purposes?

It is taxed as personal income of the owner Signup and view all the answers