Neco Model Questions Vol1 2019 Commerce Question 7

Practice essay / theory question 7 from the 2019 Neco Model Questions Vol1 Commerce examination. This question covers Business Organizations .

Neco Model Questions Vol1 2019 Commerce Essay / Theory
Topic: Business Organizations
Question 7 NECO_MODEL_QUESTIONS_VOL1 • 2019 • COMMERCE • essay

Alpha Traders is a Nigerian business that started as a partnership between three friends in 2015. In 2022 they decided to convert to a limited liability company (LLC) to raise capital and limit personal liability. The partnership agreement stipulated profit sharing in the ratio 2:3:5 among partners A, B, and C respectively. After conversion, the share capital was issued as 10,000 ordinary shares at ₦500 each, subscribed by the three former partners in proportion to their previous profit shares. The company now employs 25 staff and plans to expand by opening a new branch.

Question Parts

( a )
Explain three key differences between a partnership and a limited liability company under Nigerian law.
( b )
Calculate the number of shares each former partner subscribed to after conversion.
( c )
Discuss two advantages and two disadvantages of converting to an LLC for Alpha Traders, considering legal and financial aspects.
( d )
The new branch requires an initial investment of ₦8,000,000. The company decides to finance it by issuing new shares at the same nominal value of ₦500. (i) How many new shares must be issued? (ii) Assuming the market price per share is ₦750, calculate the total amount the company would raise and comment on the effect on existing shareholders' ownership percentage.

Detailed Solution & Marking Scheme

Get the step-by-step solution, key points required by examiners and detailed marking guidance through the Edcrib AI Tutor.

Reveal Answer

About This Question

This is Neco Model Questions Vol1 2019 Commerce Question 7. It is one of the essay questions from the 2019 Neco Model Questions Vol1 Commerce examination.

The question covers Business Organizations .

View More Neco Model Questions Vol1 2019 Commerce Questions More Neco Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support