liabilities

Examples of liabilities in the following topics:

• Types of Partnerships

  • For the purpose of this discussion, the most important types of partnerships to consider are general partnerships, limited partnerships, joint liability partnerships, several liability partnerships, and limited liability partnerships.
  • As opposed to a several liability concept, in which liability may be distributed based on certain proportionate responsibility, joint liability partnerships are equal across the board.
  • Several liability is the converse to joint liability, in which the involved parties will settle liability disputes based on respective obligations.
  • But how much liability does each party deserve?
  • Finally, there are limited liability partnerships (LLPs).

• Liabilities

  • A liability is defined by the following characteristics:
  • Liabilities are reported on a balance sheet and are usually divided into two categories:
  • Current liabilities: these liabilities are reasonably expected to be liquidated within a year.
  • Long-term liabilities: these liabilities are reasonably expected not to be liquidated within a year.
  • Liabilities of the United States as a fraction of GDP (1960-2009)

• Defining the Balance Sheet

  • A standard company balance sheet has three parts: assets, liabilities, and ownership equity.
  • Assets are followed by the liabilities.
  • Another way to look at the same equation is that assets equals liabilities plus owner's equity.
  • In other words, businesses also have liabilities.
  • This balance sheet shows the company's assets, liabilities, and shareholder equity.

• Types of Ownership

  • A business with limited liability, and a wide variety of shareholders.
  • A situation in which the liability of the owners of a business is limited to the full, paid-up value of the share capital.
  • The owner of the business has total and unlimited personal liability of the debts incurred by the business.
  • Each partner has total and unlimited personal liability of the debts incurred by the partnership.
  • A situation in which the liability of the owners of a business is limited to the full, paid-up value of the share capital.

• Owners' Equity

  • Shareholders' equity is the difference between total assets and total liabilities.
  • If liability exceeds assets, negative equity exists.
  • This creates a liability on the business in the shape of capital as the business is a separate entity from its owners.
  • Businesses can be considered, for accounting purposes, sums of liabilities and assets.
  • After liabilities have been accounted for, the positive remainder is deemed the owners' interest in the business.

• The Accounting Equation

  • The accounting equation is a general rule used in business transactions where the sum of liabilities and owners' equity equals assets.
  • A company with $30,000 in liabilities and $10,000 in owners' equity would have $40,000 in assets according to the accounting equation.
  • The fundamental accounting equation, which is also known as the balance sheet equation, looks like this: $\text{assets} = \text{liabilities} + \text{owner's equity}$.
  • On the right side of the equation are claims of ownership on those assets: liabilities are the claims of creditors (those "outside" the business); and equity, or owners' equity, is the claim of the owners of the business (those "inside" the business).
  • If the funds are borrowed to purchase the asset, assets and liabilities both increase.

• Limited Liability Companies (LLCs)

  • If you decide to set up an LLC, your liability depends on the amount you have invested.
  • This could happen if your liabilities were unlimited.
  • Limited liability company members may, in certain circumstances, also incur a personal liability in cases where distributions to members render the LLC insolvent.
  • However, most states do not dictate detailed governance and protective provisions for the members of a limited liability company.
  • In essence, this franchise or business privilege tax is the fee the LLC pays the state for the benefit of limited liability.

• Advantages of Corporations

  • Shareholders of a modern business corporation have limited liability for the corporation's debts and obligations.
  • When a person owns shares in a corporation, the losses cannot exceed the amount invested in the shares, which is called limited liability.
  • Unlike a partnership or sole proprietorship, shareholders of a modern business corporation have limited liability for the corporation's debts and obligations.
  • Without limited liability, a creditor would probably not allow any share to be sold to a buyer at least as creditworthy as the seller.
  • However, some jurisdictions also permit another type of corporation, in which shareholders' liability is unlimited, for example the unlimited liability corporation in two provinces of Canada, and the unlimited company in the United Kingdom.

• Disadvantages of Sole Proprietorships

  • Sole proprietorships face a number of difficulties in the longer terms compared to limited liability companies.
  • However, while there are certain advantages (it is easier to set up a sole proprietorship than a limited liability company, for instance), there are a number of big disadvantages, particularly in the long term, that make the sole proprietorship model quite unattractive to business owners.
  • Unlimited liability: Your small business, in the form of a sole proprietorship, is personally liable for all debts and actions of the company.

• Assets

  • That is, the total value of a firm's assets are always equal to the combined value of its "equity" and "liabilities. " In other words, the accounting equation is the mathematical structure of the balance sheet.
  • Assets and liabilities of the US as a fraction of the GDP 1945-2009.