Neco 2017 Commerce Question 7

Practice essay / theory question 7 from the 2017 Neco Commerce examination. This question covers Business Organizations .

Neco 2017 Commerce Essay / Theory
Topic: Business Organizations
Question 7 NECO • 2017 • COMMERCE • essay

A small manufacturing enterprise is owned and operated by three individuals. The partners have contributed capital and agreed on a profit‑sharing arrangement as described in the sub‑questions.

Question Parts

( a )
Explain the key differences between a sole proprietorship, a partnership and a limited liability company (LLC) with respect to (i) liability of owners, (ii) methods of raising capital, and (iii) continuity of existence.
( b )
The three partners – A, B and C – have contributed capital of ₦40,000, ₦30,000 and ₦30,000 respectively. They have agreed that profit will be shared in the ratio 2:1:1 (A:B:C). If the partnership records a net profit of ₦120,000 for the year, calculate the amount of profit each partner will receive. Additionally, discuss two essential clauses that should be included in the partnership agreement to handle the possible withdrawal of a partner.
( c )
A technology start‑up is planning to raise ₦10,000,000 in equity to develop a new software product. Evaluate which form of business organization – sole proprietorship, partnership or LLC – would be most suitable for this venture, giving at least three reasons related to sources of finance, liability and growth potential.

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About This Question

This is Neco 2017 Commerce Question 7. It is one of the essay questions from the 2017 Neco Commerce examination.

The question covers Business Organizations .

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