Types Of Form Organization Law Company Business Partnership Essay

Published Date: 02 Nov 2017

1.0 Introduction

This paper assignment or coursework are to explaining the characteristic, advantages and disadvantages forms of organization to Miss Hanson to apply it into her business. There have several alternative forms of business organization available to Miss Hanson to learn, study, and decide which one is more suitable to her to adopt it into her business.

But the important things before she make up a decision to form which types of business she need adopt she need to acknowledges that every business has its own advantages and the disadvantages (Tagiuri and Davis, 2013).

2.0 Types of Form Organization

There have several types form organization business; they are Sole Proprietor, Partnership, Companies, Private Limited Company and Public Listed Company.

2.1 Sole Proprietor

2.1.1 Characteristic and Advantages of Sole Proprietor

Sole proprietor is the easiest and simple business form to adopt in the business. The person who wants to do her business can establish it as individually. The business also fully control by her own capital, asset, investments, and the decisions making including to manage the business also by her own unleash she employs a workers to help her to run the business. The important is sole proprietor has an unlimited liability that meant if the business she done is failure or bankruptcy then she need to pay all her debts or obligation owed including her own assets. Same as easiest to opening the business for sole propriety, to end or disband it also easy because there only a few formalities to follow. Business owners can register the business with the Registrar of Company. Business name can be placed in conjunction with the owner's name under the Companies Act 2006, and received approval from the secretary of state (Marson, 2011). Sole proprietorship is a business that sells one type of product or service that does not require too much capital.

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2.1.2 Disadvantages of Sole Proprietor

The disadvantages are the owner for the business has an unlimited liability her personal assets are at high risk if her business failure she needs to pay it including all her assets. All the losses she must bear as she bear the profits capital. Ideas and management skills make it difficult for business owner’s limited business expansion (Marson, 2011). Business owners work long time and not free for long vacations.

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2.2 Partnerships

2.2.1 Characteristic of Partnerships

Partnership is registered with the Registrar of Company the business name can register a partnership with a business name or partners. Partnership is the form of business that you can establish it with some members or partners from two people to more up to twenty persons for business, ten men for the banks, and the number of partners is not limited to professional fields or known as Limited Liability Partnership (LLP) (Wood et.al. 2005). The reasons why people want to form a partnership is because they can complement each other with their own expertise or forming a partnership business is can increases a modal without having a loan from bank established in the view point of maximize the profits. The amount of capital contributed by the partners based on the conditions and agreements set forth in a written agreement known as the Partnership Articles (Articles of Partnership).

Total gains and losses are allocated to all partners equally based capital requirements or that has been confirmed in partnership articles as a stated at partnerships act 1980. Business liability is not limited except for limited partners. Business operational activities are managed by active partners or general partners. In return, the partners paid salaries and allowances in accordance with the terms of the agreement. Even Business partnerships are not taxed business. The partners will have to pay personal income tax. Partnership can trade into three types, simple partnership, limited partnership and limited liability partnership.

2.2.2 Advantages of Partnerships

It’s easily to establish and the procedures for establishing a partnership is almost similar the way you established a sole proprietorship (Marson, 2011). With many partners contributing facilitate more effective idea. Ability to think of an idea that from every partner can give confidence to the business advantages of a partnership to deal with competitors existing in the market. It’s easy to manage business from aspects contributing energy, skills and professional, is able to complement each other possible division of tasks between partners. From financial resources mainly from financial institutions, the bank or finance company (Finance) believes that many partners facilitate business partnerships to settle its obligations. Plus of the capital invested by every member able to run and develop the business with ease. Business partnerships are also not subject to business tax. Based on profits earned, business partners sharing their required by law to pay personal income tax to the Inland Revenue Board.

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2.2.3 Disadvantages of Partnership

The disadvantages of partnership are when a failure happen to the business the general partner have a high risk to losses the personal assets because the creditors have the right to claim the compensation from them while the limited partners only bounds to the capital amounts and their personal assets belonging are safe. Have a lot of partners also increase the misunderstanding and disputes between them. This is because having lots of idea and different way to manage the business will influence the decisions sometimes it hard to reach the decisions. Another disadvantages of partnership is the existence is not last, according to the partnership act 1890 clarifies when the one of the member is death, clarify as an insane under Mental Capacity 2005 or breach the agreement then the partnership is can be bring into the end. If the partners still want to continue the partnership then they need to register again at registrar of company.

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2.2.4 Types of Partnerships

There have two types of partners one is General Partners (GP) and Limited Partners (LP). General Partners (GP) is people that invest money or capital and manage the business, but are liable for any partnership debt or obligation owed. Whilst Limited Partners (LP) also contribute a capital but (LP) do not participate in the business management, and they only need to settle up their capital contributions if any failure happen into the business. While them free and not liable from the partnerships debt. Partnerships Company can know if there have words of "Ltd" for Limited Company or initial "Plc" for Public Limited Company.

2.2.4 Simple Partnership

This type of partnership consists of GP only and the GP are personally liable for the debts and obligation owed of the partnership and the business. The GP will provide an investment to the business and run the business together. Simple partnership also easy to establish and easy to dissolve, partnership also can open directly. This type of business also has a unlimited liability, and the disadvantages is when one or two of your partners do some agreement or a contract without inform you or others of your partners the agreement is still legal in the law because your partner also have the right to made decision and if the failure or breach the contract then all the partnership will be bound under it and need to responsible for it. [EXAMPLE]

2.2.4 Limited Partnerships

Limited partnership consists of two types of partnership both of General Partnership and Limited Partnership. For the GP will has an unlimited liability and manage the firms while the LP is only contribute the investments and share a profits together according the ratio percentages from the capital based on the agreement. But for the losses LP is safe and no personal liability for obligations owed to the third party its call as Limited Liability.

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2.2.4 Limited Liability Partnership

Also a partnership types and mostly applies or forms by a professionals forms of organization such as Consultant of Accounting, Lawyer firms, and Engineering firms. This firms only apply a Limited Partners only, so that meant all the members has a limited liability them liability only limited to the capital contribution no personal assets are require to pay the partnership debts cause them assets are separate legal entity from the business, but them business are register under unlimited liability at the Registrar of Company this mean the members only lost their investment but them personal asset are liable for the debts. LLP only with wound up or insolvent can bring end the partnership different with simple partnership.

Forming the LLP need a proper document and declaration of the registrar of companies, then when LLP receive a certificate than they can start to open it too.

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3.0 Conclusion

In conclusion