Louie M.

Palparan 4:30 – 5:30

Prof. Jacqueline Ignacio Acctg. 7

Reflection to the Chapter 1 pages 1-2 of the book“ A Complete Partnership Book”

by Edward A. Haman

The 1st 2 pages of the chapter 1 of the book contains the basics of accounting.
For me as an accounting student, basics means everything. It is a tool for survival in
order to remain victorious for the incoming waves of obstacles in becoming CPA. If I
don’t know what are the basics then I can’t solve the problem that is more daunting
than before. If I can, then it must be luck. The highlighted part contains what are the
meaning of each type of business organizations. It is important to know the nature of
each organization in order to know what are the applicable standards, applicable laws,
it’s advantages and even the disadvantages. If you want to engage in a business where
you can be your own boss, you can pick a sole proprietorship. It is more simple and
somehow easy to enter. If you’re not an expert or you want to divide the responsibilities
to the other partners then you can enter in a partnership. If you want to invest in a
partnership where you can only be liable to the loss up to the amount contributed as a
limited partner then limited partnership is destined for you. In the corporatioin, if you
want to freely enter and then share your shares. Lastly, limited liability company, where
all are not personally liable and all have some control in the business. All of them are
good and you just have to know their nature in order to fit to your taste. For me as an
accounting student, these basics have been very helpful because it’s not only applicable
to a certain part of accounting like financial accounting but also law and advance
accounting. It is also helpful for me if I decide to be an investor in the future.
 1 Overview of Businesses
and Partnerships

This chapter will explain various types of business organizations and help
you decide if a partnership is the right form for your business.

Types of Business Organizations

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A partnership is only one type of business organization. There are basically

five types of business organizations:

l. sole proprietorship;
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2. partnership;
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3. limited partnership;

4. corporation; and,

5. limited liability company.

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Each of these has advantages and disadvantages and are discussed in the
remaining pages.

Haman, Edward A.. Complete Partnership Book, Sphinx Publishing, an Imprint of Sourcebooks, Inc., 2004. ProQuest Ebook
Central, http://ebookcentral.proquest.com/lib/uniofmindanao-ebooks/detail.action?docID=3035157.
Created from uniofmindanao-ebooks on 2018-03-12 22:32:43.
 2 the complete partnership book

Sole A sole proprietorship is simply a business owned by one person, as an individual.

Proprietorship The main advantages to a sole proprietorship are that you are your own
boss with no one to account to and it is the most simple form of business with respect to taxes
and other government intervention. You pay taxes on your profit
and file a Schedule C form with your regular personal income tax return.

Partnership A partnership is a business owned by two or more people, who share in the
prof-its or losses. A legal definition of a partnership is: a voluntary association
of two or more persons to carry on, as co-owners, a business for profit.

Limited A limited partnership is a special kind of partnership, in which there are two
Partnership classes of partners. One class is that of general partners. The general
partners run the business and share in any profits or losses the same as in a regular partner-
ship. The other class is that of limited partners. Limited partners contribute money, but are
not allowed a say in how the business is operated. They might also be called silent partners.
Usually, limited partners are only liable for losses
up to the amount of money they contributed to the partnership.

Example: Suppose there are two general partners and three limited
partners. Each of the five people put in $2,000, for a total of
$10,000. If the partnership loses $20,000, only the two general
partners are responsible to pay that loss over the amount of the
contributions from the limited partners.

However, some limited partnership agreements also require limited partners

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to contribute additional money under certain circumstances.

Corporation A corporation is a business entity where one or more persons are owners of
the business, by being owners of stock in the corporation. Legally speaking,
the cor-poration is an entity of its own and is considered as a separate
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person. The corporation is separate from its individual stockholders. If the

corporation loses money, only the corporation is responsible for paying the
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losses. The stock-holders are not liable for losses.

More differences between these types of business organizations are
discussed in the following sections of this chapter.

Limited Liability The limited liability company is designed to give the owners (called members) the
Company limited liability of a corporation, while retaining at least some of the tax benefits.
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None of the members have personal liability and all have some control of the business.
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