FIN 534 RANK Imagine Your Future / FIN 534 RANK Imagine Your Future / - Page 42

4) Partnerships have difficulty attracting capital in part because of their unlimited liability, the lack of impermanence of the organization, and difficulty in transferring ownership 5) A major disadvantage of a partnership relative to a corporation as a form of business organization is the high cost and practical difficulty of its formation Question 8 Which of the following statements is CORRECT? 1) In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business 2) Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests 3) A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company 4) In a limited partnership, the limited partners have voting control, while the general partner has operating control over the business. Also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy.