Neco 2019 Commerce Question 7

Practice essay / theory question 7 from the 2019 Neco Commerce examination. This question covers Business Organizations .

Neco 2019 Commerce Essay / Theory
Topic: Business Organizations
Question 7 NECO • 2019 • COMMERCE • essay

Three friends, Ada, Bayo and Chidi, plan to start a business together. Their proposed capital contributions are 40%, 35% and 25% respectively of the total start‑up capital. They are debating whether to register the business as a partnership or as a private limited company (Ltd). The projected net profit for the first year is ₦1,200,000.

Question Parts

( a )
Explain the key differences between a partnership and a private limited company with respect to (i) liability of owners, (ii) management structure, and (iii) continuity of existence.
( b )
Considering the three friends’ objectives, discuss which form of business organisation would be more suitable for each of the following considerations:
( ) Need for limited liability.
( ) Desire to raise external finance.
( ) Ease of decision‑making.
( c )
If the business is formed as a partnership, calculate each partner’s share of the ₦1,200,000 profit. If it is formed as a private limited company, the company will retain 30% of profit as reserves and distribute the remaining profit as dividends in proportion to the capital contributions. Calculate the dividend each shareholder will receive.

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About This Question

This is Neco 2019 Commerce Question 7. It is one of the essay questions from the 2019 Neco Commerce examination.

The question covers Business Organizations .

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