Question

Which of the following statements is CORRECT? a. A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. b. A major disadvantage of all partnerships compared to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itself. c. Attracting large amounts of capital is more difficult for partnerships than for corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. d. In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. e. The limited partners in a limited partnership have voting control, while the general partner has operating control over the business. Also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy.

Answer 1

chatGPT

Answer:

c. Attracting large amounts of capital is more difficult for partnerships than for corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests.

steps

A.

1. slow growth vs. fast isn't the reason

2. incorporate so owners are not personally responsible for the company's debts

3. incorporate to make it easier to sell shares of the company to investors

B.

1.This statement is incorrect because it says "all partnerships" and "all corporations," which is not true for every partnership or corporation

2.partnerships, partners have to pay federal income taxes

3.In corporations, the taxes are paid by the firm itself

4.Partnerships have a disadvantage compared to corporations

5. This disadvantage is related to taxes

D.

incorrect because

in a regular partnership,

all partners are responsible for the actions of the other partners,

not just limited to the amount they invested in the business.

called "joint and several liability."

E.

1. limited partners are not individually responsible for the firm's debts in the event of bankruptcy

2.limited partners in a limited partnership do not have voting control, only the general partner does

3. pro rata basis means limited partners' liability is limited to the amount they have invested in the partnership. NOT equally divided

4. They are not personally responsible for the partnership's debts beyond that amount.

5. general partner has operating control over the business, but not voting control.