Question

Answer the following true or false for each:

1. Partnerships file Federal partnership tax returns and pay federal income taxes.

2. General partners have limited liability. That is, they can only lose their investment in the partnership and are not personally liable for partnership debts.

3. Limited partners can participate in management of the partnership.

4. Limited liability corporations may be treated as either a partnership or a corporation depending on what election is made,

5. Professionals such as accountants, attorneys and physicians can’t avoid personal malpractice liability by incorporating.

Answer 1

1. False

( Partnership file an annual information return to report their income, gains or losses. And it doesnt pay income taxes. Instead, it passes its profits or losses to partners )

2. False

( A general partner has unlimited liability and may also be held personally liable for debts of company.)

3. False

( Limited partners invests money for shares in the partnership but have no day to day involvement in the management)

4. True

( Depending on elections made by LLC, IRS can treat it as either a partnership or a corporation)