Asked by Kayla Piercy on Jun 02, 2024
Verified
Erica and Melanie set up a partnership. Which of the following statements is true?
A) Erica and Melanie must live in the same state.
B) Erica and Melanie share jointly in the firm's profits.
C) Erica and Melanie are not personally liable for all the debts of the firm.
D) None of these choices is correct.
Personally Liable
Responsibility on an individual level for debts or legal obligations, rather than through an intermediary like a corporation or LLC.
Partnership
An authorized business setup where multiple individuals participate in management and equally divide profits.
Profits
Financial gains obtained after deducting the costs, expenses, and taxes associated with doing business or an economic activity.
- Familiarize yourself with the effects of personal responsibility on owners in distinct types of business organizations.
- Recognize the importance and methods of profit-sharing and loss absorption in partnerships.
Verified Answer
ZK
Zybrea KnightJun 04, 2024
Final Answer :
B
Explanation :
In a partnership, partners share jointly in the firm's profits (and losses), which is a fundamental characteristic of partnerships. The other statements are incorrect regarding the general rules of partnerships.
Learning Objectives
- Familiarize yourself with the effects of personal responsibility on owners in distinct types of business organizations.
- Recognize the importance and methods of profit-sharing and loss absorption in partnerships.