Explain the main advantages of:
- (a) Proprietorship.
- (b)
Partnership . - (c) Limited Liability Company.
Explanation of Solution
Proprietorships: Proprietorship is a form of organization, which is owned, and controlled by an individual called the proprietor. The owners’ liability is unlimited. The most common proprietors are lawyers, physician, a small business owner and more.
Partnership: It is that form of organization which is owned and managed by two or more persons who invest and share the
Limited Liability Company: It is that form of organization which is formed as a legal entity with state charter that provides limited liability to the owners. It has a common seal.
(a) The main advantages of Proprietorships are:
Easy of formation: It is easy for forming this type of entity.
Non-taxable entity: This entity is not taxed for federal income tax purposes.
(b) The main advantages of Partnership are:
Expertise can be pooled: Expertise from different field can be pooled in as required for a business under partnership.
Non-taxable entity: This entity is not taxed for federal income tax purposes.
(c) The main advantages of Limited Liability Company are:
Legal entity: A limited liability company has a legal entity separate from its owners. It can transact business and represent the company of its own.
Expanded access to Capital: A limited liability company can pool a big capital required for the business through issuing shares to the public.
Separation of ownership and management: The management of the company is taken over by the professionals, separate from the owners.
Sustainability: The existence of the limited liability company continues for a long period of time and does not wind up with the death of any shareholders unlike partnership.
Easy transferability of ownership: In limited liability company, the ownership is transferred easily through buying and selling of shares in stock exchange.
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Chapter 12 Solutions
EBK ACCOUNTING, CHAPTERS 1-13
- Which of the following are limited liability entities? A. General partnership B. General liability company C.sole proprietorship D. S corporationarrow_forwardWhat are the distinctions between Corporation and Partnership?arrow_forwardOf the following forms of business organization, which have stockholders with limited liability? a) limited partnerships b) partnerships c) corporations d) proprietorshipsarrow_forward
- 1.What are the main advantages of proprietorships, partnerships, and limited liability companies? 2.What are the disadvantages of a partnership over a limited liability company form of organization for a profit-making business?arrow_forwardWhat are the advantages of operating a business as a partnership rather than as a corporation? What are the disadvantages?arrow_forwardWhich of the following categories of owners have unlimited liability? Select one: a. both A and B b. sole proprietors c. shareholders of a corporation d. general partners in a limited partnershiparrow_forward
- Which of the following is NOT a form of ownership that the entrepreneur should consider? a. Sole proprietorship b. Limited partnership c. Corporation d. General partnershiparrow_forwardOwners enjoy limited liability in a a) partnership b) corporation c) sole proprietorship d) proprietorshiparrow_forwardDefine Limited liability company.arrow_forward
- ■ What are the key differences between proprietorships, partnerships,and corporations? Be sure to describe the advantages anddisadvantages of each.arrow_forwardWhat is a corporation? Why might founders have chosen to form a corporation rather than a partnership? What are the advantages and disadvantages of incorporation?arrow_forwardExplain any three (3) costs and benefits of partnerships/proprietorships as compared to corporation. Give your opinion which type of organizational structure is preferable.arrow_forward
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT