AFM273 Lecture Notes - Lecture 1: Limited Liability Partnership, Sole Proprietorship, Legal Personality

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azureturtle555

1 Dec 2017

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM273

Professor

Kenneth R Vetzal

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Document Summary

Business owned and run by one person. Small in terms of revenue and profits but is one of the most common type of business in the economy. No separation between the firm and owner, income is taxed at a personal level. Life of the business is limited to life of the owner. Partnership ends on the death or withdrawal of a single partner. Limited partnership 2 kinds of owners general and limited partners. General have same rights and privileges as partners. Limited partners have limited liability(thei(cid:396) lia(cid:271)ilit(cid:455) is li(cid:373)ited to thei(cid:396) i(cid:374)(cid:448)est(cid:373)e(cid:374)t p(cid:396)i(cid:448)ate p(cid:396)ope(cid:396)t(cid:455) (cid:449)o(cid:374)t (cid:271)e seized is fi(cid:396)(cid:373) has outsta(cid:374)di(cid:374)g de(cid:271)ts (cid:271)ut . the death or withdrawal of limited partners will not dissolve the pa(cid:396)t(cid:374)e(cid:396)ship thei(cid:396) i(cid:374)te(cid:396)est (cid:449)ill (cid:271)e t(cid:396)a(cid:374)sfe(cid:396)a(cid:271)le. Ex of limited partnership private equity finds and venture capital finds. Llp li(cid:373)ited lia(cid:271)ilit(cid:455) pa(cid:396)t(cid:374)e(cid:396)ship is ca(cid:374)ada"s spe(cid:272)ial t(cid:455)pe of pa(cid:396)t(cid:374)e(cid:396)ship. Pa(cid:396)t(cid:374)e(cid:396)s (cid:272)a(cid:374) (cid:271)e active in the management of the firm and they have a degree of unlimited liability.

Related Questions

A client of the CPA firm of Harston and Mendez is a medical practice of seven local doctors. One doctor has been sued for several million dollars as the result of a recent operation. Because of what appears to be this doctor's very poor judgment, a patient died. Although that doctor was solely involved with the patient in question, the lawsuit names the entire practice as a defendant. Originally, four of these doctors formed this business as a general partnership. However, five years ago, the partners converted the business to a limited liability partnership based on the laws of the state in which they operate.

Read the following articles as well as any other published information that is available on partner and partnership liability:

âPartners Forever? Within Andersen, Personal Liability May Bring Ruin,â The Wall Street Journal, April 2, 2002, p. C1.

âCollapse: Speed of Andersen's Demise Amazing,â Milwaukee Journal Sentinel, June 16, 2002, p. D1.

Required

Based on the facts presented in this case, answer these questions:

1.	What liability do the other six partners in this medical practice have in connection with this lawsuit?
2.	What factors will be important in determining the exact liability (if any) of these six doctors?

In which of the following financial statements would a retained earnings account be found?

Select one:

a. Sole trader.

b. Company.

c. Partnership.

d. None of the options shown would contain a retained earnings account.

A partnership of three siblings would have how many capital accounts in the equity section of the balance sheet?

Select one:

a. One.

b. Two.

c. Three.

d. None.

Which of the following is an advantage of being a sole trader?

Select one:

a. The owner has total autonomy over business decisions.

b. The business is not a separate legal entity.

c. The owner has unlimited liability.

d. The business has limited life.

Partnerships should always have a Partnership Agreement in place to avoid potential disagreements.

Select one:

True

False

If a partner in a partnership decides to leave or retire from the business, the partnership can continue on with no disruption or administrative changes.

Select one:

True

False

pearbat965

Jane Doe, who has substantial personal wealth and income, is considering the possibility of starting a new business in the chemical waste management field. She will be the sole owner, and she has enough funds to finance the operation. The business will have a relatively high degree of risk, and it is expected that the firm will incur losses for the first few years. However, the prospects for growth and positive future income look good, and Jane plans to have the firm pay out all of its income as dividends to her once it is well established. Which of the legal forms of business organization would probably best suit her needs?
Answer

Proprietorship, because of ease of entry.

S corporation, to gain some tax advantages and also to obtain limited liability.

Partnership, but only if she needs additional capital.

Regular corporation, because of the limited liability.

In this situation, the various forms of organization seem equally desirable.

AFM273 Lecture Notes - Lecture 1: Limited Liability Partnership, Sole Proprietorship, Legal Personality

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