Chapter 21 - Types of business organizations Flashcards
Sole Proprietorship: Advantages
- creation is easy
- Proprietor in total control of management
- proprietor keeps all profits
Sole Proprietorship: Disadvantages
- Assumes all the risks and losses
-funding is limited to personal funds and loans
Partnership vs. Sole Proprietorship
Retains the advantages of SP but solves part of the funding problem
General Partnership
An association of two or more persons to carry on as co-owners of a business for profit [UPA Section 6(1)]. Also known as an ordinary partnership.
General Partners
Persons liable for the debts and obligations of a general partnership. Also known as partners.
Partnership Agreement
A written agreement that partners sign.
Limited Partners
Partners in a limited partnership who invest capital but do not participate in management and are not personally liable for partnership debts beyond their capital contrbutions.
Personal Liability of General Partners
The unlimited personal liability of general partners of a limited partnership for the debts and obligations of the general partnership.
Limited Liability of Limited Partners
The limited liability of limited partners of a limited partnership only up to their capital contributions to the limited partnership; limited parters are not personally liable for the debts and obligations of the limited partnership.
Limited Liability Limited Partnership (LLLP)
A special type of limited partnership that has both general partners and limited partners where both the general and limited partners have limited liability and are not personally liable for the debts of the LLLP.
Limited Liability of Shareholders
A general rule of corporate law which provides that generally shareholders are liable only to the extent of their capital contributions for the debts and obligations of their corporation and are not personally liable for the debts and obligations of the corporation.
