Question

Questions:

1. What is the difference between an LLC and an LLP? (Hint: An LLC and and LLP are not a limited partnership. All three are separate forms of organization.)

2. How are partnership profits allocated?

3. What is the difference between partnership liquidation and partnership dissolution? (Hint: do not report that they are the same.)

Answer 1

1)

Basis	LLC	LLP
Owners	Members	Partners
Minimum Numbers of owners	One Single Person	At least 2 partners
Legal Status	Usually separate from owners	Less distinct from owners
Basis of Accounts	Accrual	Cash or Accrual

2) Partners Profits are allocated on the basis of partnership ratio as decided in the partnership deed or shared based on capital balances of partners or partner's services or allocated based on the combinations of ratios, capital balance, and services.

3) Liquidation means ending company's existence and distributing assets to owners and creditors. Liquidation is last legal resort for sick company. In liquidation assets are sold and proceeds are distributed to owners and creditors

In Dissolution, owners do not get any proceeds after selling assets. Dissolution is the first step in closure of the company. Dissolution can be voluntary or involuntary and it is not considered last act in the life of partnership.