Ch12- Accounting for Partnerships & Limited Liability Companies

Ch12- Accounting for Partnerships & Limited Liability Companies

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Unformatted text preview: Click to edit Master title style 1 1 1 12 Accounting for Accounting for Partnerships and Partnerships and Limited Liability Limited Liability Companies Companies Click to edit Master title style 2 2 2 1. Describe the basic characteristics of proprietorships, partnerships, and limited liability companies. 2. Describe and illustrate the accounting for forming a partnership and for dividing the net income and net loss of a partnership. After studying this chapter, you should be able to: Click to edit Master title style 3 3 3 3. Describe and illustrate the accounting for partner admission and withdrawal. 4. Describe and illustrate the accounting for liquidating a partnership. 5. Prepare the statement of partnership equity. After studying this chapter, you should be able to: Click to edit Master title style 4 4 4 Describe the basic characteristics of proprietorships, partnerships, and limited liability companies. Objective 1 Objective 1 Objective 1 12-1 Click to edit Master title style 5 5 5 Advantages • Simple to form • Ability to be one’s own boss Disadvantages • Difficulty in raising large amounts of capital • Unlimited liability 12-1 A proprietorship is a business enterprise owned by a single individual. Proprietorship Click to edit Master title style 6 6 6 A partnership is an association of two or more individuals who own and manage a business for profit. Advantages • More financial resources than a proprietorship • Additional management skills Disadvantages • Limited life • Unlimited liability • Co-ownership of partnership property • Mutual agency 12-1 Partnership Click to edit Master title style 7 7 7 ¡ An important right of partners is to participate in the income of the partnership. 12-1 ¡ A partnership, like a proprietorship, is a nontaxable entity . ¡ A partnership is created by a contract, known as the partnership agreement or articles of partnership . Partnership Click to edit Master title style 8 8 8 12-1 Limited Partnership A variant of the regular partnership is a limited partnership . This form of partnership allows partners who are not involved in the operations of the partnership to retain limited liability. Click to edit Master title style 9 9 9 9 ¢ Combines the advantages of the corporate and partnership forms. 12-1 Limited Liability Companies ¢ LLCs must file “articles of organization” with state governmental authorities. ¢ Owners are termed “members” rather than “partners.” ¢ Members must create an operating agreement . (Continued) Click to edit Master title style 10 10 10 ¢ An LLC may elect to be treated as a partnership for tax purposes. 12-1 Limited Liability Companies ¢ Most operating agreements specify continuity of life for the LLC, even when a member withdraws....
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Ch12- Accounting for Partnerships & Limited Liability Companies

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