Neco 2022 Commerce Question 7

Practice essay / theory question 7 from the 2022 Neco Commerce examination. This question covers Business Organizations .

Neco 2022 Commerce Essay / Theory
Topic: Business Organizations
Question 7 NECO • 2022 • COMMERCE • essay

Three friends, Ada, Bayo and Chidi, plan to start a small manufacturing enterprise that will produce eco‑friendly bags. They are evaluating different forms of business organization for their venture.

Question Parts

( a )
Explain the key legal differences between a partnership and a limited liability company (LLC) that are relevant to the friends' venture.
( b )
Considering that the friends want to limit personal liability and attract external investors, recommend the most suitable form of organization for their business and justify your recommendation with at least three reasons.
( c )
Assuming they adopt the recommended form and each contributes capital as follows: Ada ₦200,000, Bayo ₦150,000 and Chidi ₦250,000. The company earns a profit of ₦300,000 for the year and decides to retain 40% of the profit for future expansion. Calculate (i) the amount of retained earnings, (ii) the remaining profit available for distribution, and (iii) each partner’s share of the distributable profit in proportion to their original capital contributions.

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About This Question

This is Neco 2022 Commerce Question 7. It is one of the essay questions from the 2022 Neco Commerce examination.

The question covers Business Organizations .

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