Principles of Insurance Chapter 3 Exercise 1 Name of student: Registration Number: Question 1: Partnership form of business is riskier than corporations for owners. Explain. Question 2. What is double taxation? How companies differ from partnership firms in terms of taxation? Question 3. Why United States introduced "LLP" and "LLC"? Question 4. How did Ernest and Young manage its risk of unlimited liability? Principles of Insurance Chapter 3 Exercise 1 Name of student: Registration Number: Question 1: Partnership form of business is riskier than corporations for owners. Explain. Question 2. What is double taxation? How companies differ from partnership firms in terms of taxation? Question 3. Why United States introduced "LLP" and "LLC"? Question 4. How did Ernest and Young manage its risk of unlimited liability? For many newly hired gradastes in the prefessional services from acsounting to law, a traditionel carect posl is to becoese a purtacr is the firm. a peomotion that recognizes professional achievement and eamo bigh compensation. In tecent years. however, the tille of partnet bas come with some additional rikk iscludies the rik of locient one's pervonal asets througth an adverse lepal fodemech apaisat the partoeribip Two or more people who want to form a butiosw sopether traditiveally have bad two options for of canit. ine their fira a partinerulip and a corporation. of the two. corpocations typically reyaire moee administra tive effor to start, but they provide an advantape that partnerahipe do not limited liakility peotection. As this chapter esplaina, the dostrine of limoted liability means that busiocss claimants, soch as credelors of the firm of plaintits suine the firm, seacrally do not have a lepal right to attach to the perional assets of the eweners of the firm Although the ounen of small corporations fane advene las rules compured to partnernhipn (aritic ace tbas the en ners of small couperatioas afe -double tascd," hecene cocporate income is taxes at the cotporate tax rase and then the ewasen pay an additional pernomal tax os the dividetedn that they receive st compteatsere of the cosporale tusinew foem Many prolesional serviot firms, inclading Lw firms ascounting firms, medtral prassiocs, archinestural farmed as partaentipe. Unlike the eveners at cotpo ration, partencrie ane enalle to peotest their personal the partnenhip ate invufficient to mest ifs daimanty evodk, a daimast can atach to the periesal avects of the partnes. Moecover, if a slaimast is filies a sisable Lawiuit, a partacr's issponikiday for damages catends severe harm to a pationt during a surpal prosedure, the injured patient cas altach to act oely the askets of the doctior who pesformed the uureery, but aleo the ofber ploxicians in the practices. In the face of increasing fitigation ridk is the United States in the 190k, the ewners of many partaerships called for reform. As a twselt, top aew organirationa! forme wete ereated the limited liahility partnernaip .

1. Principles of Insurance Chapter 3 Exercise 1 Name of student: Registration Number: Question 1:
Partnership form of business is riskier than corporations for owners. Explain. Question 2. What
is double taxation? How companies differ from partnership firms in terms of taxation? Question
3. Why United States introduced "LLP" and "LLC"? Question 4. How did Ernest and Young
manage its risk of unlimited liability? Principles of Insurance Chapter 3 Exercise 1 Name of
student: Registration Number: Question 1: Partnership form of business is riskier than
corporations for owners. Explain. Question 2. What is double taxation? How companies differ
from partnership firms in terms of taxation? Question 3. Why United States introduced "LLP"
and "LLC"? Question 4. How did Ernest and Young manage its risk of unlimited liability?
For many newly hired gradastes in the prefessional services from acsounting to law, a traditionel
carect posl is to becoese a purtacr is the firm. a peomotion that recognizes professional
achievement and eamo bigh compensation. In tecent years. however, the tille of partnet bas come
with some additional rikk iscludies the rik of locient one's pervonal asets througth an adverse
lepal fodemech apaisat the partoeribip Two or more people who want to form a butiosw sopether
traditiveally have bad two options for of canit. ine their fira a partinerulip and a corporation. of
the two. corpocations typically reyaire moee administra tive effor to start, but they provide an
advantape that partnerahipe do not limited liakility peotection. As this chapter esplaina, the
dostrine of limoted liability means that busiocss claimants, soch as credelors of the firm of
plaintits suine the firm, seacrally do not have a lepal right to attach to the perional assets of the
eweners of the firm Although the ounen of small corporations fane advene las rules compured to
partnernhipn (aritic ace tbas the en ners of small couperatioas afe -double tascd," hecene
cocporate income is taxes at the cotporate tax rase and then the ewasen pay an additional
pernomal tax os the dividetedn that they receive st compteatsere of the cosporale tusinew foem
Many prolesional serviot firms, inclading Lw firms ascounting firms, medtral prassiocs,
archinestural farmed as partaentipe. Unlike the eveners at cotpo ration, partencrie ane enalle to
peotest their personal the partnenhip ate invufficient to mest ifs daimanty evodk, a daimast can
atach to the periesal avects of the partnes. Moecover, if a slaimast is filies a sisable Lawiuit, a
partacr's issponikiday for damages catends severe harm to a pationt during a surpal prosedure,
the injured patient cas altach to act oely the askets of the doctior who pesformed the uureery, but
aleo the ofber ploxicians in the practices. In the face of increasing fitigation ridk is the United
States in the 190k, the ewners of many partaerships called for reform. As a twselt, top aew
organirationa! forme wete ereated the limited liahility partnernaip (U.P) and moee recenthy, the

2. limited liahility compasy (U.LC) Tbese hybrid organizations shicld the ouncr" mosts from
daimints and woid the adverne incocte in rules applicable vo cotpoestione. Many existine
purternhigs swinched to the limited. liakitity hybrids to capitalize on their abiaty to better peotect
partness from lawuits. For ecampls. prive required polvic acooanting birms to operate as a part.
neriship. Throe standards were trlaxed in 1992, and sainched to a fimited Lability bybrid. A
senior executive of timst and Yowng explained the reavon his Big Four acbosating firm became
as L.P. vorganicing as a limited-liability partacrovip would put us en a kvet plying fielt with
coeporale America. .... We can't atriact poople f to work for the firm if they arel worricd ahout
beving their bomes in the case of a dinasier. The awountine pootescice is getting marsleres by
the litigation thas has oweraken us in the lant few yoars" Derting the 2000 , the popularity of the
L.LC orga. eizatioasl form prew rapidly. Prastitioners report that L.C. have bocoene the
oefanirational form of cboise for moit new buiness sartien. Eatly newarth wipperts these reports,
indicating that $s peccent of the new bus eoemputed to 59 pertesat for eovporations, the next
most pepular ofpinieational form. Principles of Insurance Chapter 3 Exercise ! Name of student:
Registration Number: Question 1: Partnership form of business is riskier than corporations for
owners. Fxplain. Question 2. What is double taxation? How companies differ from partnership
firms in terms of taxation"? Question 3. Why United States introduced "LL.P" and "LLC"?
Question 4. Hew did Emest and Young manage its risk of unlimited liability?