Which statement best describes a general partnership?

Which statement best describes a general partnership?

• A. It is owned by two or more individuals and has unlimited liability for all partners; profits taxed at partners' rates.
• B. It is a separate legal entity with corporate taxation.
• C. It is a member-owned cooperative with profits distributed to members.
• D. It is a business owned by two or more individuals with limited liability.

Answer: (D)

Liability and tax flow define a general partnership. It’s a business owned by two or more individuals who share management, but each partner has unlimited personal liability for the partnership’s debts and obligations. The partnership isn’t taxed at the corporate level; instead, profits (and losses) pass through to the partners and are taxed at their personal rates. The statement that best describes this structure is the one that highlights ownership by two or more individuals with unlimited liability. The other descriptions point to different forms: a corporation is a separate legal entity with corporate taxes; a member-owned cooperative distributes profits to members; and a limited-liability description doesn’t fit a general partnership, which by its nature carries unlimited liability for the partners.

Liability and tax flow define a general partnership. It’s a business owned by two or more individuals who share management, but each partner has unlimited personal liability for the partnership’s debts and obligations. The partnership isn’t taxed at the corporate level; instead, profits (and losses) pass through to the partners and are taxed at their personal rates.

The statement that best describes this structure is the one that highlights ownership by two or more individuals with unlimited liability. The other descriptions point to different forms: a corporation is a separate legal entity with corporate taxes; a member-owned cooperative distributes profits to members; and a limited-liability description doesn’t fit a general partnership, which by its nature carries unlimited liability for the partners.