Partnerships mcq:Aptitude
In a partnership, the division of profits among partners is based on:
a) Capital contribution
b) Number of employees
c) Sales revenue
d) Seniority of partners
Answer: a) Capital contribution
What type of partnership involves partners with unlimited liability for the partnership’s debts?
a) Limited partnership
b) General partnership
c) Limited liability partnership
d) Joint partnership
Answer: b) General partnership
In a limited partnership, there must be at least:
a) Two general partners and one limited partner
b) Two limited partners and one general partner
c) Two general partners only
d) Two limited partners only
Answer: a) Two general partners and one limited partner
Which of the following is not a characteristic of a limited liability partnership (LLP)?
a) Limited liability for partners
b) Flexibility in management structure
c) Pass-through taxation
d) Unlimited liability for partners
Answer: d) Unlimited liability for partners
In a partnership, the relationship between partners is primarily based on:
a) Ownership of assets
b) Profit sharing
c) Employee hierarchy
d) Shareholder rights
Answer: b) Profit sharing
What is the maximum number of partners allowed in a partnership firm?
a) 5
b) 10
c) 20
d) There is no maximum limit
Answer: d) There is no maximum limit
Which of the following is true about a silent partner?
a) Has no liability in the partnership’s debts
b) Is actively involved in managing the partnership
c) Has limited liability in the partnership’s debts
d) Has equal decision-making power as other partners
Answer: a) Has no liability in the partnership’s debts
What is the main advantage of a partnership compared to a sole proprietorship?
a) Limited liability
b) Shared decision-making
c) Lower taxes
d) Unlimited growth potential
Answer: b) Shared decision-making
In a partnership, the partners are typically liable for the partnership’s debts:
a) According to their capital contribution
b) Equally
c) Based on their seniority in the partnership
d) In proportion to their profit share
Answer: d) In proportion to their profit share
Which type of partnership offers limited liability to all partners?
a) General partnership
b) Limited partnership
c) Limited liability partnership
d) Joint partnership
Answer: c) Limited liability partnership
How are losses shared among partners in a partnership?
a) Equally
b) According to their capital contribution
c) In proportion to their profit share
d) Based on seniority in the partnership
Answer: c) In proportion to their profit share
What is the main disadvantage of a general partnership?
a) Unlimited liability for partners
b) Limited decision-making power for partners
c) Complex tax filing requirements
d) Difficulty in attracting investors
Answer: a) Unlimited liability for partners
In a limited partnership, who is responsible for the management of the partnership?
a) General partners
b) Limited partners
c) Both general and limited partners
d) External consultants
Answer: a) General partners
Which of the following is true about a partnership agreement?
a) It is optional and not necessary for a partnership to function.
b) It is a legal requirement for all partnerships.
c) It outlines the rights and responsibilities of partners.
d) It can be modified without the consent of all partners.
Answer: c) It outlines the rights and responsibilities of partners.
In a partnership, the liability of a limited partner is limited to:
a) Their capital contribution
b) Their personal assets
c) The partnership’s debts
d) The total profit of the partnership
Answer: a) Their capital contribution
What is a buy-sell agreement in a partnership?
a) An agreement to sell the partnership to another firm
b) An agreement to buy out a partner’s interest in the partnership
c) An agreement to dissolve the partnership
d) An agreement to divide the profits among partners
Answer: b) An agreement to buy out a partner’s interest in the partnership
Which type of partnership allows partners to have different levels of liability and authority?
a) General partnership
b) Limited partnership
c) Limited liability partnership
d) Joint partnership
Answer: c) Limited liability partnership
How are profits taxed in a partnership?
a) At the partnership level
b) Only at the individual partner level
c) Both at the partnership and individual partner level
d) Profits are not subject to taxation in a partnership
Answer: b) Only at the individual partner level
What is a partnership dissolution?
a) The process of adding new partners to the existing partnership
b) The process of transferring partnership assets to individual partners
c) The process of ending the partnership
d) The process of converting a partnership into a corporation
Answer: c) The process of ending the partnership
In a partnership, which type of partner has personal liability for the partnership’s debts?
a) General partner
b) Limited partner
c) Silent partner
d) Active partner
Answer: a) General partner
What is a partnership deed?
a) A legal document that establishes a partnership
b) A document outlining the partnership’s marketing strategy
c) A document specifying the partnership’s profit distribution formula
d) A document detailing the partnership’s hiring process
Answer: a) A legal document that establishes a partnership
What is the purpose of a capital account in a partnership?
a) To track each partner’s profit share
b) To track each partner’s capital contribution
c) To track the partnership’s expenses
d) To track the partnership’s liabilities
Answer: b) To track each partner’s capital contribution
In a partnership, what does the term “joint and several liability” mean?
a) Partners share liability equally
b) Each partner is individually liable for the partnership’s debts
c) Partners are liable only for their capital contribution
d) Liability is limited to the partnership’s assets
Answer: b) Each partner is individually liable for the partnership’s debts
What is a sleeping partner in a partnership?
a) A partner who is not actively involved in the partnership’s operations
b) A partner who provides financial support to the partnership
c) A partner who has limited liability in the partnership
d) A partner who has equal decision-making power as other partners
Answer: a) A partner who is not actively involved in the partnership’s operations
What is the purpose of a profit and loss appropriation account in a partnership?
a) To allocate profits to individual partners
b) To track the partnership’s expenses
c) To record the partnership’s capital contributions
d) To calculate the partnership’s tax liabilities
Answer: a) To allocate profits to individual partners
In a limited liability partnership, how is the partnership’s income taxed?
a) At the partnership level
b) Only at the individual partner level
c) Both at the partnership and individual partner level
d) The partnership’s income is not subject to taxation
Answer: c) Both at the partnership and individual partner level
What is the role of a managing partner in a partnership?
a) To oversee the partnership’s finances and operations
b) To provide financial support to the partnership
c) To handle legal matters for the partnership
d) To recruit new partners for the partnership
Answer: a) To oversee the partnership’s finances and operations
What is a partnership at will?
a) A partnership that can be dissolved by any partner at any time
b) A partnership that has an indefinite term
c) A partnership with multiple partners
d) A partnership with unlimited liability for all partners
Answer: b) A partnership that has an indefinite term
How are partnership losses treated for tax purposes?
a) Deducted from individual partners’ taxable income
b) Deducted from the partnership’s taxable income
c) Distributed equally among partners
d) Treated as personal expenses for partners
Answer: a) Deducted from individual partners’ taxable income
What is the primary advantage of a limited partnership?
a) Limited liability for all partners
b) Flexibility in management structure
c) Easy transferability of ownership interests
d) Lower taxes compared to other partnership types
Answer: b) Flexibility in management structure