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Discuss the advantages and disadvantages of forming a partnership as opposed to a sole proprietor.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter14: Choice Of Business Entity—operations And Distributions

Section: Chapter Questions

Problem 5DQ

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Discuss the advantages and disadvantages of forming a partnership as opposed to a sole proprietor.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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Which of the following is a disadvantage of the partnership form of organization? A. limited life B. no taxation at the partnership level C. flexibility in business operations D. combining of financial resources
Which one of the following would not be considered in the development of a partnership agreement? A. profit and loss levels B. processing disputes C. stock options D. asset contributions
Can a partners personal assets in a limited liability partnership be at risk?
Mutual agency is defined as: A. a mutual agreement B. the right of all partners to represent the companys normal business operations C. a synonym for partnership D. a partnership between two partnerships
Any assets invested by a particular partner in a partnership ________. A. do not become a partnership asset but instead remain with the partner B. can be used only by the investing partner C. become the property of all the partners D. are the basis for all profit sharing