Q7969773
AID: 1825 | 25/03/2019
[Delimiter]
[General guidance]
[Section: Concepts and reason]
Partnership: The business entity that is found by two or more persons who invest and
distribute the future revenue or loss based on the pre-determined ratio is partnership. It
may differ between the partners.
Corporation: Corporation is an entity formed by the persons. It has perpetual succession.
It is also known as company. It may be private company or public company.
Sole proprietorship: Sole proprietorship is the form of business entity that is started and
controlled by a person. The decisions of the business are done at the sole decision of the
proprietor.
[Section: Fundamentals]
LLC: Limited Liability Company is a new structure of the company that combines both
the corporation and the partnership features. It mainly depends upon the tax benefits of
the partnership firm and protection of liability of the corporation.
Limited liability partnership: The partnership started for a specific purpose that limits the
liability of partners in the case of any loss is known as limited liability partnership.
Generally, partnership has unlimited liability to partners.
[Delimiter]
[Starting Hint]
Based on the information given in the question, determine the correct statement.
[Delimiter]
[Step 1]
2)
Determine the correct statement:
The partner enters the firm with the value of $20,000. Thus, the contributed amount will
be treated liable even after the retirement of the partners.
Therefore, he or she cannot be liable for more than $20,000.
[Part 2]
Part 2
[Answer]
He or she cannot be liable for more than $20,000.
[Answer End]
[Answer Choice: Wrong]
He or she cannot be liable for more than $10,000.
[Answer Choice End]
[Answer Choice: Correct]
He or she cannot be liable for more than $20,000.
[Answer Choice End]
[Answer Choice: Wrong]
He or she has the unlimited personal liability for the debts of the partnership.
[Answer Choice End]
[Answer Choice: Wrong]
His or her liability is restricted to double the amount of capital invested in the business.
[Answer Choice End]
[Part 2]
[Explanation]
It is mentioned to determine the correct statement. Thus, the persons are entering into the
limited partnership with the value of $20,000 as the limited partner. In the limited
partnership, the partners will be liable up to the amount which they contributed even after
the retirement of the partners.
[Common mistakes]
Do not assume that the partners have the unlimited liability for the debts of the
partnership because in the limited liability, the partners cannot enjoy the unlimited
liability and they are liable only for the contributed amount.
[Hint for next step]
