Jesse and Harold decide to form a partnership. They believe that this arrangement will have the following advantages:
1. They may be able to reduce their personal income taxes during the start-up years.
2) They may be able to split income with family members who are employed by the business.
3) They may be able to realize a tax deferral on their business income.
4) They will have limited personal liability for the debts of the business.
All of these statements are correct except:

Question

Jesse and Harold decide to form a partnership. They believe that this arrangement will have the following advantages: 
1. They may be able to reduce their personal income taxes during the start-up years.
2) They may be able to split income with family members who are employed by the business.
3) They may be able to realize a tax deferral on their business income.
4) They will have limited personal liability for the debts of the business.
All of these statements are correct except:

Quizplus · Accepted Answer

Statement 1 is correct as partnerships can allow for income to be split and potentially reduce personal income taxes for each partner. Statement 2 is incorrect as income splitting with family members is not a benefit exclusive to partnerships and can be achieved through other business structures as well. Statement 3 is incorrect as tax deferral on business income can be achieved through other business structures as well, and is not exclusive to partnerships. Statement 4 is correct as partnerships offer limited personal liability for the debts of the business.

Jesse and Harold Decide to Form a Partnership