Management 2017 - Company Law Course Work Assignment 1 The advantage of the partnership is partners have to support the business with start-up capital, meaning the number of partners is higher, the more money will be put into the business, which allows more potential to grow the business. Secondly, partners could split the work according to their different talents which mutually benefit each other. Also, as long as the partners reach an agreement since the partnership is less regulated strictly than companies, it is easier to form, manage and run. On the other hand, the risk of disagreements between partners. People are expected to have different ideas on how to run the business. This leads to disputes, besides from harming the business, but also the relationship between partners. Secondly, the partnership provides unlimited liability, meaning each of the partners shares the financial risks and liability of the business. Lastly, since partners share profits equally. This may lead to arguments that some partners aren 't putting enough effort in the running of business, but still gaining the equal amount of rewards. The private limited company obviously has limited liability, which protects the firm from being responsible for the potential amount of loss that exceeds their financial capability. Secondly, added credibility makes it easier for a private limited company to raising capital by borrowing money and achieve financing without personal risk. On the contrarary,
There are many pros and cons for starting a partnership. A partnership is simple, inexpensive and easy to start. Partnership's formalities are relaxed where there are no required annual meetings, as compared to other formations. Unlike other types such as a corporation, a partnership is not required to file annual financial reports with the state and not required to maintain documents. Most importantly, partnership enjoys favorable tax treatment as a passed-through entity and do not have to pay minimum taxes that are required of LLCs and corporation. However, because partnership formation is relatively simple, there is greater risk of disputes among the partners due to poor organization. Most importantly, the partners in a partnership do not enjoy limited liability. They are personally liable for the partnership’s debt, losses, and other obligations. Under the agency theory, the partnership and a partner may be held liable for other partner’s conduct. Thus, it is imperative to anticipate potential issues that the partnership may be exposed to and reduce it to a written agreement. The agreement should address how partnership reaches a decision and how to resolve a dispute when it arises. In addition, the agreement should layout partner’s termination as well as how to wind-up in the event of partnership dissolution.
Please answer the questions posed at the end of each case study in essay form. Each essay will be judged on your capacity to present strong, logical discussions that support your conclusions.
Proprietorships have three advantages: they are easy and inexpensive to form, subject to few regulations, and no corporate income taxes. The disadvantages are difficult to raise capital, unlimited liability and limited life. Partnership are similar to proprietorships in that they can be stablished relatively easily and inexpensively. The partners are generally subject to unlimited personal liability, this makes it difficult for partnerships to raise large amount of capital. Corporation also have unlimited lives, and easy transfer of ownership, limited liability and ease of raising capital to operate larger businesses. The disadvantages are double taxation, the corporation’s earnings are taxed; and then when its after-tax earnings are paid out as dividends, those earnings are taxed again as personal income to the stockholders. Limited liability reduces the risks endure by investors; and other things held constant, the lower the firm’s risk, the higher its
They are in charge of the debts that happened because of the business. In addition, another disadvantage is continuity. This means that when the owner of the business dies the the Sole Proprietorship dies with him. The most common type of partnership is the general partnership but this is owned by more than one person. Partners can invest in equal or unequal sums of money in the investment. A silent partner is when one partner invests all of the funds needed for the business but plays no role in its management (Griffin 90). A different type of partner is is the financial investor likely owns the entire business and the labor partner owns nothings this is referred to a sweat equity (Griffin 90). An advantage of partnership is the being able
Partnerships can be dreadful at times. They have many disadvantages. For example, if your business were to incur a loss, the loss will be split amongst you and your
Some advantages that Microsoft might have are that in general partnerships, each participant is personally responsible for the actions of the company. This includes debts, liabilities and the wrongful acts of other partners. One advantage of a limited liability partnership is the liability protection it affords. This type of partnership structure protects individual partners from personal liability for negligent acts of other partners or employees not under their direct control, states the SBA. In addition, smaller local partners are not personally responsible for company debts or other obligations. This is advantageous for
· More capital- a number of people together can inject more finance into the business than one person alone. · Expansion- with the new skills, increased labour and greater capital a partner brings the business will have an increased potential for future growth. Disadvantages of Partnership = ==
Partnership is a type of business organisation in which two or more individuals work in a business. Investment, profits and loss and other resources are equally shared according to the terms and conditions of the partnership agreement. In absence of such agreement, a partnership business is most likely to be a failure. Participants in an enterprise agree to share the associated risks and rewards equally. The Partnership Act 1890 explains that a partnership is the relation which exists between people carrying on a business as usual with an aim of gaining profit. (Alan Griffiths & Stuart Wall, 2008, p133 ) states that "This is a form of business relationship which is usually entered into by individuals who wish to take advantage of the combined
There are also many disadvantages of Partnerships. In partnerships, sometimes partners disagree and when they disagree it may be a problem for business. For instance, there may be disagreements as one may feel has more control of the business because of his large contribution. That is why there is a need for a deed of partnership before venturing into any business agreements. The other disadvantage is that partnerships have unlimited liability this means each general partner is liable for the debts of the firm no matter who was responsible for causing those debts. Division of profits also means that partners may as well share risks general partners can lose their personal properties and everything else they own if a business goes bankrupt or loses any lawsuit. Partnerships are also difficult to terminate- Once one has committed himself to the partnership, it is not easy to get out of it except through death which leads to automatic termination of the
A joint venture can offer the advantage of eliminating cultural barriers by one partner being a local. Another advantage is sharing
For the partnership, it involves more than one player who is also involved in the business structure. The partners share all costs and profits after entering into an agreement that intends to share any commercial interests. The partners also contribute funds to start and operate the business as the starting capital. This means that there is a pool of experience and resources by the two and the partners share the taxes. The disadvantages of this form of
Partnerships are symbiotic relationships that require each partner to act in good faith as they ‘owe a fiduciary duty to one another’ and must places the needs of their partner below their own. The advantages of a partnership are based entirely on the partner’s relationship. There is a shared cost for starting and maintain the business, as well as shared time and effort in running it. There is also the advantage of having shared liability, however this can also be a disadvantage if your partner abandons you, as you are also liable for their debts. Another disadvantage is that of shared decisions, whilst most partnerships are of joint minded individuals, there are some issues that would have to be resolved by vote, and a partnership stops you from making sole
The general partners can focus all of their time and efforts into the business while worrying less about money/capital
The arguments in favour of business partnering stress the positive aspects of the partnership, enabling both people and business issues to be considered in a wide range of decisions that will
Liability Protection: One of the most important reasons for forming a corporation is the limited liability protection provided to its owners. Corporations are separate legal entities from the people who own them, therefore Shareholders are prevented, and would not loose personal assets due to a company's debts or legal issues.