• 1 Marks

BMF – May 2023 – L1 – SA – Q1 – Business and Organizational Structures and Choices

Identify an incorrect feature of an ordinary partnership business.

The following features describe an ordinary partnership business, EXCEPT:

A. There is an understanding that the partners’ liabilities are limited to capital contributions

B. There is the risk of disagreement between partners

C. Partners bear the risk that decisions taken may turn out bad

D. A sleeping partner must be made personally liable for any unpaid debts of the business

E. Each partner’s share of the profits is treated as an income for the purpose of calculating personal income tax

D. A sleeping partner must be made personally liable for any unpaid debts of the business

Explanation: This option is incorrect because, while sleeping partners (also known as dormant partners) may be liable for business debts, they are not typically made personally liable in the manner described here. The level of liability for partners in an ordinary partnership generally depends on the nature of their involvement in the business and the terms of the partnership agreement.

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