Chapter 12 Accounting

Steps to liquidate a partnership

1. Record sales of non cash assets for cash, and any gain or loss from liquidation is allocated to partners using their income and loss sharing agreement. 2. Pay/settle all partner liabilities. 3. Distribute and remaining cash based on partners capital balances

Characteristics of a Partnership

Voluntary association, limited life, taxation, mutual agency, unlimited liability, and co-ownership of property

S corporation

Provides all shareholders with limited liability, but allows them to elect to be treated as partnership for tax purposes

Capital deficiency

During liquidation At least one partner has a debt balance in their capital acct at the point of final distribution

limited partnership

Has both general partners and limited partners

Partnership

More than one owner allowed, owners have unlimited liability, unincorporated association of two or more people to pursue a business for profit as co owners

C corporation

One or more owners, owners have limited liability, business is taxed

LLC-Limited Liability Corporation

One or more owners, owners have limited liability, no business tax

Proprietorship

Onlyone owner allowed, owner has unlimited liability

Limited liability partnership

Protects innocent partners from malpractice or negligence claims of other partners