Unlimited liability is not a criteria used to determine that the partnership will be treated as corporation for tax purpose.
What is partnership for tax purposes?
- A partnership is a business or trade relationship formed by two or more people. Each person contributes money, property, labor, or skill, and shares in the company's profits and losses.
- Under federal law, a partnership is not a taxable entity. This means that, unlike the corporate income tax, there is no separate partnership income tax.
- A partnership is an agreement between two or more people to manage a business and share profits and liabilities. All members of a general partnership company share both profits and liabilities. Professionals such as doctors and lawyers frequently form limited liability partnerships.
- Income, as well as deductions and credits, are passed through to each partner. This means that profits are only taxed once.
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