Accounting Multiple Choice Question – 2 August 2024

The Lucy Partnership comprises of six partners who share profits in the following ratio 6:5:4:3:2:1

They are considering incorporation as a limited company, Lucy Partners Ltd.

Only the six partners will become shareholders on incorporation.

In relation to Lucy Partners Ltd, which of the following statements is necessarily true?

Select ONE answer:

1. All partners will be equal shareholders in Lucy Partners Ltd
2. If Lucy Partners Ltd wishes to raise new share capital, the number of shareholders may be allowed to rise above six
3. All shareholders will become directors and will have the right to be equally involved in the management of the new Limited company
4. If one of the shareholders in Lucy Partners Ltd dies, the company will be dissolved

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct  –> Shareholders do not have an  automatic right to be a director or to be involved in management (3).  The partners’ individual shareholdings will be determined by an agreement that is not necessarily related to the existing partnership agreement (1). The concept of perpetual succession means that the company will not dissolve upon the death of a shareholder (4).
3. Not correct
4. Not correct

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