Advanced Financial Accounting Exam 2
Questions With Solutions 100% Correct
Subchapter S Corporations 1) Have nearly all the legal characteristics of corporations
including limited liability of owners.
2) Have profits that pass through to owners similar to partnerships.
3) Ownership is by law limited to 100 stockholders.
4) The stockholders must be individuals, estates, trusts and certain tax-exempt entities.
Limited Partnerships (LPs) Has at least one "limited" partner who may not participate in
management in any way but whose personal losses for partnership debt are limited to the amount
invested. The limited partnership must also have at least one general partner with unlimited
liability.
Limited Liability Companies (LLCs) 1) All owners are liable only for their own acts and
omissions, and the acts and omissions of those under their direct supervision.
2) Owners of these entities do not have unlimited personal liability for the negligent or
fraudulent acts of other partners not under their control.
Partnership Legal Form Advantages 1) Flexibility in defining relationships
2) Allows a firm to broaden the breadth and depth of knowledge residing within the firm
Questions With Solutions 100% Correct
Subchapter S Corporations 1) Have nearly all the legal characteristics of corporations
including limited liability of owners.
2) Have profits that pass through to owners similar to partnerships.
3) Ownership is by law limited to 100 stockholders.
4) The stockholders must be individuals, estates, trusts and certain tax-exempt entities.
Limited Partnerships (LPs) Has at least one "limited" partner who may not participate in
management in any way but whose personal losses for partnership debt are limited to the amount
invested. The limited partnership must also have at least one general partner with unlimited
liability.
Limited Liability Companies (LLCs) 1) All owners are liable only for their own acts and
omissions, and the acts and omissions of those under their direct supervision.
2) Owners of these entities do not have unlimited personal liability for the negligent or
fraudulent acts of other partners not under their control.
Partnership Legal Form Advantages 1) Flexibility in defining relationships
2) Allows a firm to broaden the breadth and depth of knowledge residing within the firm
