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To provide funds to pay to the retiring partner or to the representatives of a deceased partner, generally partners:
- a)Create a Sinking Fund
- b)Create Joint Life Policy
- c)Create Reserve Fund
- d)Create a separate Bank Account
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
To provide funds to pay to the retiring partner or to the representati...
Joint Life Policy:
In order to provide funds to pay to the retiring partner or to the representatives of a deceased partner, partners can create a joint life policy. This involves taking out a life insurance policy on the lives of all the partners in the business.
How it works:
- The partners agree on the amount of insurance coverage needed to cover the buyout of a retiring or deceased partner's share of the business.
- The partners are named as beneficiaries of the policy.
- In the event of the retirement or death of a partner, the proceeds from the life insurance policy can be used to buy out the departing partner's share of the business.
Benefits of a Joint Life Policy:
- Provides a source of funds to pay for the departing partner's share of the business without having to liquidate assets or take out loans.
- Ensures a smooth transition in the event of a partner's retirement or death.
- Helps protect the financial interests of the remaining partners by providing a financial safety net.
In conclusion, creating a joint life policy is a practical and effective way for partners to ensure that there are funds available to pay to the retiring partner or the representatives of a deceased partner. It offers financial security and peace of mind to all partners involved in the business.
In order to provide funds to pay to the retiring partner or to the representatives of a deceased partner, partners can create a joint life policy. This involves taking out a life insurance policy on the lives of all the partners in the business.
How it works:
- The partners agree on the amount of insurance coverage needed to cover the buyout of a retiring or deceased partner's share of the business.
- The partners are named as beneficiaries of the policy.
- In the event of the retirement or death of a partner, the proceeds from the life insurance policy can be used to buy out the departing partner's share of the business.
Benefits of a Joint Life Policy:
- Provides a source of funds to pay for the departing partner's share of the business without having to liquidate assets or take out loans.
- Ensures a smooth transition in the event of a partner's retirement or death.
- Helps protect the financial interests of the remaining partners by providing a financial safety net.
In conclusion, creating a joint life policy is a practical and effective way for partners to ensure that there are funds available to pay to the retiring partner or the representatives of a deceased partner. It offers financial security and peace of mind to all partners involved in the business.
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To provide funds to pay to the retiring partner or to the representatives of a deceased partner, generally partners:a)Create a Sinking Fundb)Create Joint Life Policyc)Create Reserve Fundd)Create a separate Bank AccountCorrect answer is option 'B'. Can you explain this answer?
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To provide funds to pay to the retiring partner or to the representatives of a deceased partner, generally partners:a)Create a Sinking Fundb)Create Joint Life Policyc)Create Reserve Fundd)Create a separate Bank AccountCorrect answer is option 'B'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about To provide funds to pay to the retiring partner or to the representatives of a deceased partner, generally partners:a)Create a Sinking Fundb)Create Joint Life Policyc)Create Reserve Fundd)Create a separate Bank AccountCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for To provide funds to pay to the retiring partner or to the representatives of a deceased partner, generally partners:a)Create a Sinking Fundb)Create Joint Life Policyc)Create Reserve Fundd)Create a separate Bank AccountCorrect answer is option 'B'. Can you explain this answer?.
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