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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Brief Exercise 1-22 Forms of Business Organization

Listed are the forms of business organization and several related advantages or disadvantages.

Chapter 1, Problem 22BE, Brief Exercise 1-22 Forms of Business Organization Listed are the forms of business organization and

Required:

Match each form of business organization with its respective advantage or disadvantage.

(Hint: Some advantages or disadvantages may be related to more than one form of business organization.)

To determine

Concept Introduction:

Forms of business organization: A business can be started in any form of business organization. The form of business organization can be a sole proprietorship, a general partnership, a limited partnership, a limited liability partnership, S corporation, a corporation or a limited liability company.

To Indicate:

The appropriate advantages and disadvantages for each type of organization.

Explanation

Three different form of business organization are explained as follows:

  • Partnership: Limited partnership is the form of partnership having more than one owner. It is a type of partnership under which a partner has unlimited liability and other partners have limited liabilities. It limits the liability of a limited partner to the extent of his capital contribution or a specified amount. The partner with limited liability shall not be liable for any contribution over and above the limit.
  • S Corporation: Subchapter (S) corporation is a type of corporation made under specific Internal Revenue Code requirements. S corporation can avoid the double taxation of dividend declared by it in the hands of shareholders.
  • Limited liability Companies: Limited Liability Company is the form of a corporation which blends the characteristics of a corporation and a partnership as well. In case of a Limited Liability Company, the liability of owners is limited as incorporation and taxation flow as in the partnership.

The appropriate advantages and disadvantages for each type of organization are explained as follows:

    Advantage or disadvantage Form
    a...

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