Question

Businesses can be classified into the following forms: sole proprietorship, partnership, corporation, limited liability company (LLC), and limited liability partnership (LLP). Different forms of businesses have different characteristics. Which of the following characteristics would apply to a partnership?
a) Subject to unlimited personal liability
b) Income is allocated on a pro rata basis
c) Can easily raise large amounts of capital
d) Taxed at individual level
e) Chartered by a state and is its own legal entity separate and distinct from its owners and managers
f) Legal arrangement between two or more people

Answer 1

Answer:

b) Income is allocated on a pro rata basis

Explanation:

A partnership is an agreement between two or more people to oversee a business and share in the profit and losses made by the business.

In a partnership when income comes in it is shared.on a pro rata basis.

This means income is given based on the level of ownership of the business.

For example a partner that has 60% ownership of the partnership is expected to collect 60% of the business income.

Pro rata is also called proportional rate.