Which of the following is a true statement about the characteristics of partnerships?
A) In a limited-liability partnership, a wayward partner can create a large liability for the other partners.
B) General partners have mutual agency and limited liability.
C) Income and loss of the partnership "flows through" to the partners.
D) The partnership agreement must be in writing.

Question

Quizplus · Accepted Answer

The income and loss of the partnership are distributed among the partners and are reported on their individual tax returns. This is referred to as flow-through taxation.

Option A is incorrect because in a limited-liability partnership, partners have limited liability, and they're not personally liable for the mistakes or wrongdoing of other partners.

Option B is incorrect as general partners have mutual agency, but they're also personally liable for the debts of the partnership.

Option D is incorrect because a partnership agreement can be oral or written, but a written agreement is recommended to avoid misunderstandings and conflicts.

Which of the Following Is a True Statement About the Characteristics