Partnerships and Limited Liability Companies

Vocabulary

capital account

equity account for each individual partner

deficiency

claim the partnership has against a partner. The loss and distribution of that loss to the partner results in a debit balance in a partner's capital account.

limited liability company (LLC)

company treated as a partnership or sole proprietorship for tax purposes but that limits the liability of its owners

liquidation

process of paying liabilities, selling assets, and distributing remaining cash and assets to partners during a dissolution of the partnership

partnership

business entity owned by two or more people with the goal of generating a profit

partnership agreement

formal document including an outline of how a partnership will work

proprietorship

business organization owned by one individual

realization

first step of liquidating a partnership when the assets of the partnership are sold for cash

revenue per employee

measure of how efficient a business is in generating revenue based on the number of employees

statement of members' equity

equity statement for an LLC used to illustrate the changes in the members' equity accounts during a given period

statement of partnership equity

statement used to illustrate the changes in the partnership capital (equity) accounts during a given period

statement of partnership liquidation

statement that provides a visual summary of the partnership liquidation