COMPANY LAW

Company Law

Company Law

Scenario 1

For starting a business, the first phase is choosing what type of business would be preferred from the several business entities choices such as sole proprietorship, partnership, corporation and Limited Liability Company. In several of the small business entities owner chooses either partnership or a limited liability company (LLC).

Partnership

In partnership the owners jointly combine their resources to gain joint authority. It means that each partner will have equal authority according to their percentage share in forming the business agreement for the organization. In partnership liability is shared jointly by the partners and cooperative relations between two (or more) companies, governed by a contract, centred on one or more common or complementary projects, which provides a varying degree of integration between the resources of the companies involved. (Blumberg, 2009, Pg # 324)

Advantages

Simply put, has more than one owner of the company more money to help build business. This combination of talent, skills and experience with the inclusion of new partners, which could increase in profits and profitability of the business helps. partnership leads to more effective management and financial planning, which otherwise is difficult in the case of the sole owner of the company.

Disadvantage

Surprisingly, but partnership is not necessarily a legal entity and only for tax purposes is determined. The existence of partnership comes to an end with the destruction, disability, lack of money or even withdrawing partner. In addition, the partnership is likely to become partners in case of dissatisfaction. There are many cases where one partner in rights of others, as each partner has an equal voice in key decisions.

Limited Liability Company

Limited Liability Company is similar to the partnership and corporation in formation. The owner of Limited liability Company is not personally responsible for its debts. There are some exceptions in the rules pertaining to fraudulent behaviours of the owner. (Frank, 1985, Pp. 89) The major concept behind that the lawful character of a business is distinct from that of its members. The most significant component that flows from his distinct lawful character clause is that of restricted liability. It is directed at giving investors smallest protection in their enterprise over their own personal lives. (Cheong, 2001, Pp. 112)

Advantages

Owners of a LLC have the liability protection of a corporation. A LLC exists as a separate entity much like a corporation. Members cannot be held personally liable for debts unless they have signed a personal guarantee.

Disadvantage

Starting sole trader or partnership is less paperwork and complexity. In LLC it is completely different from sole proprietorship, partnership or corporation is classified for tax purposes. Classification can be selected or used by default.

Difference

Main difference between Limited Liability Company and partnership is the legal responsibility for debts and the paperwork which is required for forming the organization. In terms of partnership no special paper work is needed, it can easily be form by mutual understanding between two or more than two person. Whereas in Limited Liability company a requirement of filing articles is required to form an organization and adhering to ...