8.1 Financial Literacy
Answer: What challenges, related to accounting, do small businesses face and how can they overcome them?
In Module 8, we will discuss the Equity section of the Balance Sheet, its financial statement presentation, and its meaning from an investment perspective. In addition, we have an extra credit assignment on business legal structure and the four business legal entities:
Sole proprietorship
Partnership
Corporation
Limited liability Company, LLC.
Each of the above legal entities are viewed from a Generally Accepted Accounting Principles (GAAP) perspective as separate accounting business entities. As separate accounting business entities, the financial records of the entity are presented separately from the financial records of their owners or investors.
However, only two of the above entities, corporations and limited liability companies are, also, viewed as separate legal entities. In the case of both sole proprietorships and partnerships, the personal liability of the sole proprietor and partners are tied to the business and have no legal limitations.
As you work through the concepts in this module, please consider the advantages and disadvantages of the business organization types and their relevance to personal investment decisions. Identify and define business legal structures.
