Question

Indicate whether each of the following statements is e true or false.

________ 1. Partnerships have unlimited life. Corporations do not.

________ 2. Partners jointly own partnership assets. A partner’s
claim on partnership assets does not attach to specific
assets.

________ 3. In a limited partnership, the general partners have
unlimited liability.

________ 4. The members of a limited liability company have limited
liability, like shareholders of a corporation, and they
are taxed like corporate shareholders.

________ 5. Because of mutual agency, the act of any partner is
binding on all other partners

Answer 1

1. Partnerships have unlimited life. Corporations do not.

false

Corporations have unlimited life, but do not partnerships

A partnership may be ended voluntarily at any time through the acceptance of a new partner or the withdrawal of a partner.

It may be ended involuntarily by the death or incapacity of a partner.

Partnership dissolution occurs whenever a partner withdraws or a new partner is admitted.

Dissolution does not necessarily mean that the business ends. If the continuing partners agree, operations can continue without interruption by forming a new partnership.

True 2. Partners jointly own partnership assets. A partner’s
claim on partnership assets does not attach to specific
assets.

A partner may contribute personal property to the partnership, but the contributed property becomes partnership property unless some other arrangement has been negotiated. Similarly, if the partnership purchases property with partnership assets,such property is presumed to be partnership property and is held in the partnership's name. The partnership may convey or transfer the property but only in the name of the partnership. Without the consent of all the partners, individual partners may not sell or assign partnership property.

In some jurisdictions the partnership property is considered the personal property that each partner owns as a "tenant in partnership," but other jurisdictions expressly state that the partnership may own property. The tenant in partnership concept, which is the approach contained in the UPA, is the result of adopting an aggregate approach to partnerships. Because the aggregate theory is that the partnership is not a separate entity, it was thought that the partnership could not own property but that the individual partners must actually own it. This approach has led to considerable confusion, and the RUPA has expressly stated that the partnership may own partnership property.

False 3. In a limited partnership, the general partners have
unlimited liability.

each partner is personally and individually liable for all partnership liabilities.

-Creditors' claims attach first to partnership assets. If these are insufficient, the claims then attach to the personal resources of any partner, irrespective of that partner's equity in the partnership.

Because each partner is responsible for all the debts of the partnership, each partner is said to have unlimited liability.
True 4. The members of a limited liability company have limited
liability, like shareholders of a corporation, and they
are taxed like corporate shareholders.

A limited liability company (LLC) is a relatively new type of business legal form that provides some liability protection (like a corporation) and other features similar to a partnership. The owners of an limited liability company (LLC) are called members. Each member is an owner of the company; there are no owner shares, as in a corporation.

The members of the LLC have a limited liability for debts of the business, unless they have personally guaranteed loans or other debts or they act outside the bounds of their duties for the business. For example, limited liability can't protect a member who breaks the law or who harasses someone.

The liability of an LLC member is similar to the liability of an S corporation shareholder.

An LLC can also elect to be taxed as a corporation or S corporation, and the members then would pay tax in the same way as corporate shareholders or S corporation owners.

LLC members are considered self-employed and not employees. So, yes, they must pay self-employment tax on their share of the business net income.

True 5. Because of mutual agency, the act of any partner is
binding on all other partners

each partner in the partnership is an agent in the business and the authority to make business decisions that commit or bind the partnership, as a whole, to a business agreement with a third party or entity.