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Hi Mike
Two questions from the OT tests which I don’t understand:
1. In partnership with her civil partner Justina, Jasmine runs a shoe shop ‘Jasmine’s Shoes’. Which answer best describes the extent of Jasmine’s liability in the event of the business having to close by reason of its debts?
There is no limit to the extent of Jasmine’s liability
Limited to the extent of the fair value of the firm’s tangible non-current assets
Limited to the extent of the fair share of the firm’s assets
Limited to the amount as yet unpaid by JustinaI had put the last option, and the answer is the first option
2. Jasmina runs her own shoe shop as a sole trader. Which answer best describes the extent of Jasmina’s liability in the event of the business having to close by reason of its debts?
Limited to the extent of Jasmina’s personal guarantee to the bank
Limited to the fair value of the business’ assets
Limited to the amount as yet unpaid on any shares held by Jasmina
There is no limit to the extent of Jasmina’s liabilityI had put the third option and the last one is correct.
Please help me clear my doubts as I am confused between the liabilities for sole traders and partnerships
Avnish
Sole traderships and partnerships do not have share capital so there is no concept of liability being restricted to the “amount, if any, as yet unpaid on shares held by them” as is the case with the liability of shareholders in a limited company
A sole trader is WHOLLY liable for the debts of the business – the business does not have a separate legal identity.
And a partnership is simply a collection of sole traders acting as a single firm but, again, the firm has no separate legal identity and therefore all partners are individually WHOLLY liable for the WHOLE of the debts of the partnership
Ok?
Thanks!! You make studying this paper a bit better than most textbooks!
Avnish
Only a BIT better? 🙁
Only MOST textbooks? :-((
I’m not sure that that’s a compliment or what’s called “faint praise”
:-)))
I say a bit…but what I really mean is A LOT!!!!
Most textbooks include Beckers and Kaplan…Those publishers have too much writing in their books!
Now you can say it is a Compliment!!!!
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