Lisa and John own a partnership that provides rental equipment for parties and special occasions.Which of the following is true about the way Lisa and John would handle company profits?
A) They automatically split the profits, with 50 percent for Lisa and 50 percent for John.
B) They would do nothing because partnerships require that profits remain in the business.
C) They would divide the profits according to each person's investment in the business.
D) They would distribute the profits according to the terms of the partnership agreement.
E) They would split the profits according to how many hours each person worked.

Question

Quizplus · Accepted Answer

Partnerships typically have a written partnership agreement that outlines how profits will be distributed among the partners. Lisa and John would follow the terms of this agreement to distribute the profits. Option A and E are incorrect because the profit distribution is not necessarily a 50/50 split or based on hours worked. Option B is incorrect because profits can be distributed to partners in accordance with the partnership agreement. Option C may be a possible method of profit distribution but it is not stated in the scenario that each partner invested different amounts of money.

Lisa and John Own a Partnership That Provides Rental Equipment