LRA 225 WEEK 1 PRACTICE SOLUTION
STUDY SHEET QUESTIONS AND DETAILED
ANSWERS
●● Sole Proprietorship Advantages
Answer: 1. No legal formalities to create
2. Sole owner gets all profit
3. Sole owner exercises total control over management
4. Single taxation, deductible losses and expenses
●● Sole Proprietorship Disadvantages
Answer: 1. Sole owner has unlimited personal liability
2. Sole owner bears all the risk of loss
3. Inability to bring in other owners
4. Inability to transfer to business as a whole
●● General Partnership
Answer: Two or more general partners
Separate legal, but not tax paying, entity
●● General Partnership Advantages
,Answer: 1. No legal formalities to create, flexible structure
2. Each partner shares in profit and control of management
3. Single taxation, deductible losses and expenses
4. Business can survive withdrawal of a partner
●● General Partnership Disadvantages
Answer: 1. All partners have unlimited personal liability
2. Limited transferability of ownership
●● Limited Partnership (LP)
Answer: One or more general partners and limited partners
●● LP Advantages
Answer: 1. General partners have right to participate in management
2. Limited partners have limited personal liability
3. Choice of taxation, deductible losses and expenses
4. Survives withdrawal of partner (except sole general partner)
●● LP Disadvantages
Answer: 1. Legal formalities to create
2. General partners have unlimited personal liability
3. Limited partners have no right to participate in management
, 4. Limited transferability of ownership (requires partner approval,
andmust leave at least one general partner)
●● Limited Liability Partnership (LLP)
Answer: All partners have limited liability for business but unlimited
liability for their own acts
●● LLP Advantages
Answer: 1. All partners participate in management
2. All partners enjoy limited personal liability
3. Choice of taxation, deductible losses and expenses
4. Survives withdrawal of a partner
●● LLP Disadvantages
Answer: 1. Limited transferability of ownership (partner approval)
2. Unlimited liability for owner's own acts
3. Legal formalities to create
●● Limited Liability Limited Partnership (LLLP)
Answer: Limited partnership where general partners also have limited
liability for business obligations
●● LLLP Advantages
STUDY SHEET QUESTIONS AND DETAILED
ANSWERS
●● Sole Proprietorship Advantages
Answer: 1. No legal formalities to create
2. Sole owner gets all profit
3. Sole owner exercises total control over management
4. Single taxation, deductible losses and expenses
●● Sole Proprietorship Disadvantages
Answer: 1. Sole owner has unlimited personal liability
2. Sole owner bears all the risk of loss
3. Inability to bring in other owners
4. Inability to transfer to business as a whole
●● General Partnership
Answer: Two or more general partners
Separate legal, but not tax paying, entity
●● General Partnership Advantages
,Answer: 1. No legal formalities to create, flexible structure
2. Each partner shares in profit and control of management
3. Single taxation, deductible losses and expenses
4. Business can survive withdrawal of a partner
●● General Partnership Disadvantages
Answer: 1. All partners have unlimited personal liability
2. Limited transferability of ownership
●● Limited Partnership (LP)
Answer: One or more general partners and limited partners
●● LP Advantages
Answer: 1. General partners have right to participate in management
2. Limited partners have limited personal liability
3. Choice of taxation, deductible losses and expenses
4. Survives withdrawal of partner (except sole general partner)
●● LP Disadvantages
Answer: 1. Legal formalities to create
2. General partners have unlimited personal liability
3. Limited partners have no right to participate in management
, 4. Limited transferability of ownership (requires partner approval,
andmust leave at least one general partner)
●● Limited Liability Partnership (LLP)
Answer: All partners have limited liability for business but unlimited
liability for their own acts
●● LLP Advantages
Answer: 1. All partners participate in management
2. All partners enjoy limited personal liability
3. Choice of taxation, deductible losses and expenses
4. Survives withdrawal of a partner
●● LLP Disadvantages
Answer: 1. Limited transferability of ownership (partner approval)
2. Unlimited liability for owner's own acts
3. Legal formalities to create
●● Limited Liability Limited Partnership (LLLP)
Answer: Limited partnership where general partners also have limited
liability for business obligations
●● LLLP Advantages
