. These are arrangements between individuals to carry on business in common with a view
to profit. A partnership, however, involves obligations to others, and so a partnership is usually governed
by a partnership agreement. Unless it is a limited liability partnership (LLP), partners will be fully liable
PART A: THE CONTEXT AND PURPOSE OF FINANCIAL REPORTING
6
In law, sole traders and partnerships are not separate entities from their owners. However, a limited
liability company is legally a separate entity from its owners. Contracts can therefore be issued in the
company's name.
For accounting purposes, all three entities are treated as separate from their owners. This is called the
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