Which statement describes a General Partnership?

• A. A corporation with directors
• B. A sole proprietor firm
• C. Two or more partners share in the management, profits, risks of the business. Income is shared among the general partners and is reported on personal tax forms, Each general partner is personally liable for business debts and liabilities.
• D. A limited liability company

Answer: (C)

In a General Partnership, two or more people run the business together, sharing management, profits, and the risks. This arrangement uses pass-through taxation, so the earnings flow to each partner’s personal tax return rather than being taxed at the entity level. At the same time, each general partner has personal liability for the partnership’s debts and obligations, meaning personal assets can be at risk if the business owes money or faces claims. This combination—joint management and profit sharing with personal liability and pass-through taxation—best matches the described concept. It differs from a corporation or LLC, where liability is typically limited, and from a sole proprietorship, which involves a single owner.