APPENDIX C
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.
Problems
C.1
E-Z Manufacturing Company
LO C-3,
Students are required to calculate partners’ share of net income, determine
C-10
the effects of income taxes for partners, and prepare a statement of partners’ equity.
15 Easy
C.2
LO C-6,
C-7
Waffon Corporation
Students must analyze the effects of stockholders’ investments, net income, and dividends on stockholders’ equity.
15 Easy
C.3
LO C-10
Guenther and Firmin
Students are required to distribute net income
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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.
3.
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
Due to its nature, partnership is generally liable for the acts of the individual partners if committed in the course of the partnership business. However, liabilities of every partner may be regulated by the written agreement signed by partners. If no written agreement is signed by partners, liabilities of the partnership are regulated by the Partnership Act. If one of the partners retires, he or she may not be liable for the future debts of partnership if an official notice of the change is sent to creditors and the public. However, there were no official notice sent by the partners in the case; therefore, Toby may be liable for the debts of partnership. Due to the death of the third partner, partnership may be dissolved. In order to pay off the debts, assets should be sold and partners are free to continue the same kind of business after the dissolution of the
The organizational forms a company might have as it evolves from a start-up to a major corporation are: sole proprietorships, partnerships and corporations. The advantages of a sole proprietorship are that is is easily and inexpensively formed; is subject to few government regulations and it’s income is not
This is the issue at point in the present case. In the present case John and Amanda are co-owners of a house and due to recent separation, Amanda wants to compel John to let her buy out his shares. However, John is in opposition to this as he would rather have the house sold on an open market and the proceeds divided. To yield a potentially higher price. To determine the possible outcome of this situation, the legal issues need to be discussed. To make
Capital can come from state and corporate pension funds, public and private endowments and personal investors
Many believe that liability is a biggest issue in a general partnership than in a sole proprietorship. The owners of the company are still fully liable for any debts the company may accrue as well as the liability for any lawsuits that may be brought against the company. However, the bigger issue in a partnership is that now each partner can be liable for the other partner’s actions. If one partner is sued for malpractice, the other partner may suffer because of it.
When it comes to partnerships Alex, Bill, Carl, and Devon will have two options- a general partnership or a limited partnership. Partnerships are beginning to be a business form of the past. Once upon a time, partnerships were “the default form of business and provided the benefit of pass-through taxation, but lacked the important feature of limited liability” (Chrisman, 2010, p. 465). In a general partnership, each partner associated with the entity will be held liable for their own business decisions as well as
partnership to continue, in the event a partner withdraws from the group. Similar to sole proprietorship, general partnerships tend to have a difficult time rounding up funding and resources, since most of the necessary capital comes from each partner's personal assets. This in turn may hinder longevity and growth of the organization. 4. Control In a typical general partnership, all partners will have equal rights and control over the business. It allows any partner to act on behalf of the business to make decisions and negotiation with
Mutuality of obligation-This refers to the parties’ mutual understanding and also assents in expressing their
Partnership liability tort can take place when a partner or all partners acting on partnership business causes injury to a third person. Cause of this tort could be a negligent act, a breach of trust, breach of fiduciary duty, defamation, fraud, or another intentional tort (Cheeseman, 2010, p. 538). Under the Uniform Partnership Act, partners are jointly and severally liable for torts and breaches of trust (UPA, 2010). This is true even if the co-partner(s) did not participate in the act. The joint and severally liable tort permits a third party to sue one or more of the partners
In cases involving joint or several liabilities, each person who is deemed negligent is required to pay the entire amount that is determined by the judge. If one person is unable to pay, the other person must pay the entire amount.
This is the most common type of company and is what most people have in mind when considering whether or not to set up a company. Each shareholder’s liability is limited to the amount unpaid on the shareholding owned by them. However, the shareholder must also be aware that they run the risk of losing monies paid to the company whether in full or part payment of the shares owned by them.
* A broader capital base gives the company more access to credit which gives the company an option to venture into new business opportunities
The most common examples of a partnership are doctor's surgeries, veterinarians, accountants, solicitors and dentists. As stated earlier, most partners in a partnership face unlimited liability for their debts. The only exception is in a Limited Partnership. This is where a partnership may wish to raise additional finance, but does not wish to take on any new active partners.
In the following paper, I will look to identify the roles and differences between Limited Liability Corporations and Partnerships. Each has different advantages and disadvantages than the other. I will look to break down each and then identify which method of ownership would be the preferred method from an individual responsibility standpoint. Having stake or being invested into a company is important to know what you rights are and what you as an owner are responsible, liable for, and or entitled to. It is important to understand these things so the best
The person`s partnership, is a separate between two people in common property, for example apartment members are forced to share the commonplace such as sitar, yard and other place. In this case a partnership is established not to benefit just for cooperation. This concept can have many examples in society, for example, two suppliers that