When a Partner Is Unable to Pay a Capital Deficiency

question 45

Multiple Choice

When a partner is unable to pay a capital deficiency:

• A) The partner must take out a loan to cover the deficient balance.
• B) The deficiency is absorbed by the remaining partners before distribution of cash.
• C) The partnership ends before distribution of cash.
• D) The deficient partner is relieved of the liability.
• E) The remaining partners must wait for the deficiency to be paid before cash is distributed.

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Definitions:

Preincorporation Subscription

An agreement by an individual to purchase shares in a corporation that is yet to be incorporated, showing early commitment to the entity's future.

Shareholder

An individual or entity that owns shares in a corporation, granting them certain rights, such as the right to vote on corporate matters and receive dividends.

Memberships

The state or condition of being a member or part of a society, club, or other group, typically entailing certain privileges or responsibilities.

Nonpublic Corporation

A corporation whose shares are not traded publicly on stock exchanges and is usually privately held, often family-owned or with a small group of investors.