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.
Want to see more full solutions like this?
Chapter 12 Solutions
Accounting (Text Only)
- The audited accounts of Rattle Limited for year-end December 31, 2013, show a profit of $2,400,000 after charging the following: Depreciation $380,000 Legal fees $723,000 Bad debts $67,000 Donations $55,400 Accrued interest $51,000 Foreign travel $75,000 Repair and maintenance $216,000 Premium on insurance $88,000 Other Information: a. - Legal fees of $723,000 are for expenses in respect of the recovery of debts. b. - The company made donations of $55,400 to a registered charity. c. - The bad debt expense is a percentage of debtors at year-end. d. - Foreign travel expense was for a trip by the marketing manager to meet with potential buyers. e. - The capital allowances have been calculated at $142,000 f. - The premium paid of $88,000 was on insurance for the business’ property. g. - There were acquisition expenses of $45,000 associated with the expansion of the business. What is Rattle Ltd.’s corporate tax liability?…arrow_forwardA company's income statement for September reports a net income of $75,000. During the same month, the company paid $15,000 in dividends. If the beginning stockholders' equity was $0, what is the ending balance in stockholders' equity?arrow_forwardI need the correct answer to this general accounting problem using the standard accounting approach.arrow_forward
- I need help with this general accounting question using standard accounting techniques.arrow_forwardIf the risk-free rate is 0.02, the market risk premium is 0.07, and the beta of the stock is 1.2, what is the return of the stock?arrow_forwardI am trying to find the accurate solution to this financial accounting problem with appropriate explanations.arrow_forward
- Assume that Juanita is indifferent between investing in a corporate bond that pays 10.20 percent interest and a stock with no growth potential that pays a 6 percent dividend yield. Assume that the tax rate on dividends is 15 percent. What is Juanita's marginal tax rate?arrow_forwardI am trying to find the accurate solution to this general accounting problem with the correct explanation.arrow_forwardI need help with this general accounting problem using proper accounting guidelines.arrow_forward
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT