Question

A unique feature of partnerships (compared with publicly owned corporations) is that ______________________ .

A)They do not have to follow GAAP.
B)They are not governed by state laws.
C)Their books have to be maintained on the tax basis.
D)They do not file income tax returns.
E)None of the above.

Answer 1

Answer: Option E

Explanation: The difference between a partnership firm and a corporate firm is the extent of liability of the owners. In case of partnership firm the extent of liability of the partners are unlimited and their personal assets could be sold to pay off the debt in case of any default.

On the other hands, in case of corporate firm the extent of liability of owner is limited to their capital investment. In case of a company structure, the company and the owner are considered to be separate.

Hence from the above we can conclude that the correct option is E.