(11) Pgs. 711-718

(11) Pgs. 711-718 - returns General partners make...

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Chapter 11 – Pages 711-718: User Relevance: Shares are purchased in the anticipation of the share value increasing so that the shares can be sold in the future for a profit Forms of Organization: Sole Proprietorship: A single-owner business They have unlimited liability, meaning the sole proprietor is 100% liable for all debts of the business There is no separate taxation for sole proprietorship as there is for corporations Owner’s equity section has only one account called owner’s capital Cash withdrawn for personal use is referred to as a withdrawal by the owner If you no longer want to own a proprietorship, you have to sell your whole business to shut it down Partnership: Two or more individuals agree to conduct business under one name Partnership agreement When there is no partnership agreement, the distribution of assets and profits is assumed to be equal for all partners Income earned by the partners must be reported on their personal tax
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Unformatted text preview: returns General partners make day-to-day decisions about the business and have unlimited liability Limited partners have limited involvement (do not make day-to-day decisions) Capital account separate account for each partner Drawing account Keeps track of amounts withdrawn by a partner If you want to leave your partnership, you have to find another partner to take your place, or discuss your leave with your partners Corporation: Legally separate from its shareholders Shareholders have limited liability Have corporate tax in addition to personal income tax Board of directors = decision makers Most a shareholder can lose is his investment in the share Corporations can raise additional capital much more easily than partnerships since they can issue more shares or bonds...
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