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
ACCOUNTING,CHAP.1-13
- The industrial enterprise "HUANG S.A." purchased a sorting and packaging machine from a foreign company on 1/4/2017 at a cost of €500,000. The useful life of the machine was estimated by the Management at ten (10) years, while the residual value was estimated at zero. For the transportation of the machine from abroad to the company's factory, the amount of €20,000 was paid on 15/4/2017. As the insurance coverage of the machine during transportation was the responsibility of the selling company, HUANG S.A. proceeded to insure the machine from 16/4/2017 to 15/4/2018, paying the amount of €1,200. The delivery took place on 15/4/2017. As adequate ventilation of the multifunction device is essential for its proper operation, the company fitted an air duct on the multifunction device. The cost of the air duct amounted to €2,000 and was paid on 20/4/2017. On 25/4/2017, an external electrician was paid €5,000 for the electrical connection of the device. The company also paid €5,000 to an…arrow_forwardThe industrial enterprise "HUANG S.A." purchased a sorting and packaging machine from a foreign company on 1/4/2017 at a cost of €500,000. The useful life of the machine was estimated by the Management at ten (10) years, while the residual value was estimated at zero. For the transportation of the machine from abroad to the company's factory, the amount of €20,000 was paid on 15/4/2017. As the insurance coverage of the machine during transportation was the responsibility of the selling company, HUANG S.A. proceeded to insure the machine from 16/4/2017 to 15/4/2018, paying the amount of €1,200. The delivery took place on 15/4/2017. As adequate ventilation of the multifunction device is essential for its proper operation, the company fitted an air duct on the multifunction device. The cost of the air duct amounted to €2,000 and was paid on 20/4/2017. On 25/4/2017, an external electrician was paid €5,000 for the electrical connection of the device. The company also paid €5,000 to an…arrow_forwardI need answer typing clear urjent no chatgpt used pls i will give 5 Upvotes.only typing .arrow_forward
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT