APPENDIX CFORMS OF BUSINESS ORGANIZATIONSBelow Are Essay
4442 WordsDec 24, 201418 Pages
FORMS OF BUSINESS ORGANIZATIONS
Below are brief descriptions of each problem. These descriptions are accompanied by the estimated time (in minutes) required for completion and by a difficulty rating. The time estimates assume use of the partially filled-in working papers.
E-Z Manufacturing Company
Students are required to calculate partners’ share of net income, determine
the effects of income taxes for partners, and prepare a statement of partners’ equity.
Students must analyze the effects of stockholders’ investments, net income, and dividends on stockholders’ equity.
Guenther and Firmin
Students are required to distribute net income…show more content…
The business entity principle requires that a business entity be regarded as separate from the other affairs of its owner(s). 2.
The primary advantages of the partnership form of organization are the opportunity to bring together sufficient capital to carry on a business and the opportunity to combine the specialized skills of a group of individuals. In comparison to a corporation, the partnership form of organization has the advantages of ease of organization, freedom from regulation, and flexibility of action afforded the owners. In addition, the partnership might be organized in a form that limits the liability of the owners.
The primary disadvantages of the general partnership form of organization are the unlimited liability and the mutual agency features. Unlimited liability means that any one partner may be held liable for all the debts of the partnership if the other partners prove unable to contribute.
Mutual agency means that one partner may enter into agreements that are binding upon all the other partners.
Mutual agency means that every partner in a partnership has the right to bind that partnership to contracts. 4.
There are two important reasons why this type of business would probably be organized as a limited partnership rather than as a general partnership. First, the 50 investors throughout the state could be designated as limited partners, thereby limiting their personal liability for any losses incurred by the business to