CFIN (with MindTap Finance, 1 term (6 months) Printed Access Card) (MindTap Course List)
6th Edition
ISBN: 9781337407342
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 1, Problem 19PROB
Summary Introduction
To determine: the likelihood of agency problem in three major forms of business organizations namely, proprietorship,
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Refer to Chapter 11-1A, page 619: Characteristics of sole proprietorships, partnerships, and corporations
Required
The three primary types of business organization are proprietorship, partnership, and corporation. Each type has characteristics that distinguish it from the other types. In the left column of the following table write the name of the type of business organization that is most likely to possess the characteristic that is described in the right column of the table. The first item is shown as an example.
Business Type
Characteristic
Proprietorship
Owned and operated by a single individual
Subject to double taxation
Has a retained earnings account on its balance sheet
One owner may be held personally liable for actions taken on behalf of the business by different owner
Profits benefit a single individual
Frequently uses legal agreements to define profit distribution for two or more owners
Most highly regulated form of business
The business dissolves with the death of its only…
For the three major forms of business, LLC, partnership, and corporation, discuss two advantages and two disadvantages of each on taxation, equity owner's legal liability, and relative voice in day-to-day business management.
Capture in a table/matrix the similarities and differences between a private corporation and a cooperative. Please give atleast 5 similarities and 5 differences.
Which of the two will you suggest to an individual that intends to put up a business, and why? (atleast 5 senteces)
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Chapter 1 Solutions
CFIN (with MindTap Finance, 1 term (6 months) Printed Access Card) (MindTap Course List)
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- Answer the following question in your own words: Explain the following corporate structures. Limited Liability Company (LLC) Joint Stock Company General Joint Stock Company (SAOG) Joint Venture Holding Company Commercial Agentarrow_forwardMatch each corporate characteristic 1 through 8 with the description that best relates to it. Characteristic Descriptions 1. Transferability of ownership 2. Ability to raise large capital amounts 3. Duration of life 4. Legal status Entity with similar rights as individual 5. Ease of formation High because buying stock is attractive 6. Government regulation Indefinite 7. Mutual agency More severe than partnerships and proprietorships 8. Owner authority and control TT TT Oarrow_forwardThe following describe several different business organizations. Determine whether each description best refers to a sole proprietorship (SP), partnership (P), corporation (C), or limited liability company (LLC).arrow_forward
- Give the pros and cons of using partnership, corporation and any other forms in establishing own accounting firm.arrow_forward# 1 - Analyze, in brief, the rights of general partners. #2- How can a corporation incorporated in one state conduct interstate commerce? #3- Explain the effect of the Sarbanes-Oxley Act on corporate governance.arrow_forwardQuestion based on the picture attached. (a) Explain any three (3) differences between maximising profits and maximising shareholders’ wealth. Justify which one should be the goal of a company. (b) Explain any three (3) costs and benefits of partnerships/proprietorships as compared to corporation. Give your opinion which type of organizational structure is preferable.arrow_forward
- A legal entity with several corporate features, such as limited liability, an unlimited life span, an elected board of directors, and an administrative staff. B-Corp Franchise Cooperative Partnershiparrow_forwardWhich of the following organization forms accounts for the greatest number of firms? O A. Limited partnership OB. Sole proprietorship O C. "C" corporation O D. "S" corporationarrow_forwardCompare the potential for agency problems in sole proprietorships, partnerships, and corporations. In light of your analysis, why is the corporate form of organizations so popular?arrow_forward
- Which of the following is not a component of the formula used to distribute profit? * After all other allocations, the remainder divided according to the profit and loss sharing ratio Salary allowances to the managing partners Interest on the average capital investment Interest on notes to partners A corporation whose stock can be purchased by anyone and is traded in stock markets is known as a(n) * Government-owned corporation Close corporation Open corporation O Not-for-profit corporationarrow_forwardBased on the advantages and disadvantages of each of the following forms of businesses, give an example of a business that would be best suited to that particular form. Be sure to explain why that is the best option for the particular business. (1) Sole proprietorship (2) Limited partnership (3) Corporation (4) Limited Liability Companyarrow_forwardIn 5 or more sentences, answer the following 1. What is the main difference in the statement of financial position of a partnership compared to that of a sole proprietorship form of business?arrow_forward
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