Final answer:
The statement is false. During the liquidation of a limited liability partnership, cash payments to partners are made according to the final capital account balances, regardless of the income-sharing ratio. LLPs limit partners' liability to their capital contributions, unlike a general partnership where personal assets are at risk.
Step-by-step explanation:
The statement that subsequent cash payments to partners during the liquidation of a limited liability partnership may be made in the ratio of their capital account balances, after these balances have been reduced to the income-sharing ratio, is false.
This ignores the fundamental principles of liquidation for a limited liability partnership (LLP). Upon liquidation, any remaining assets or cash are distributed in accordance with the capital account balances of the partners, assuming there is no agreement or legal requirement to the contrary.
In an LLP, partners enjoy protection from personal liability for the business's debts, limiting their loss to the amount they have invested in the company. Therefore, the liquidation process respects the agreed-upon capital contributions and the original ratios, as the partners' personal assets are not at risk.
However, in a general partnership, the disadvantages include shared personal liability for the debts of the business. Each partner could be responsible for the full amount of the business's liabilities, which contrasts sharply with the limited liability in an LLP.