15.1 Formation of partnerships

• What is a partnership defined as?

  Association of two or more people
• Partners agree to share the profits and losses of the business in an agreed proportion
• Partners have unlimited liability for the debts and obligations of the partnership
• A partnership agreement is crucial because it ensures partners understand their rights and obligations.


  True
• What are capital contributions in a partnership agreement?

  Initial capital invested by each partner
• Partners in a partnership agree to share the profits and losses in an agreed proportion
• Each type of partnership offers different levels of liability and management participation.


  True
• What does a partnership agreement outline regarding profit and loss sharing?

  Agreed proportions for sharing profits and losses
• What is the first step in forming a partnership?

  Agreement
• Initial capital contributions are specified in the partnership agreement

  True
• Partners agree to share the profits and losses of the business in an agreed proportion
• What does 'Profit and Loss Sharing' refer to in a partnership agreement?

  Sharing profits and losses
• Match the type of partnership with its characteristic:

  General Partnership ↔️ Unlimited liability for all partners

  Limited Partnership ↔️ Limited liability for limited partners

  Limited Liability Partnership ↔️ No liability for each other's actions
• Legal and tax implications of partnership formation are crucial to ensure compliance and financial efficiency
• A partnership is formed by an agreement between two or more people to carry on a business together.


  True
• What does mutual agency mean in a partnership?

  Each partner binds the others
• Match the element of a partnership agreement with its description:

  Profit and Loss Sharing ↔️ Agreed proportions for sharing profits and losses

  Capital Contributions ↔️ Initial capital invested by each partner

  Drawings ↔️ Amounts withdrawn for personal use

  Management and Decision-Making ↔️ How the business is managed
• The profit and loss sharing clause in a partnership agreement specifies the agreed proportions for sharing profits and losses.
• An agreement is an essential element for forming a partnership.


  True
• Match the type of partnership with its liability:

  General Partnership ↔️ Unlimited

  Limited Partnership ↔️ Limited for limited partners

  Limited Liability Partnership (LLP) ↔️ Limited
• The first step in forming a partnership is reaching an agreement
• The partnership agreement is a legal contract outlining the terms and conditions of the partnership
• What is a partnership defined as?

  Association of two or more people
• The partnership agreement is a legal contract outlining the operational terms of the business

  True
• The profit and loss sharing is defined as the agreed proportions for sharing the partnership's profits and losses
• In a general partnership, all partners actively manage the business


  True
• What is the purpose of a well-crafted partnership agreement?

  Ensures understanding of rights
• Partnership profits are taxed at corporate rates

  False