Advantages And Disadvantages Of Different Business Structures — страница 2

the new partner. Can get credit easily because supplies are not at risk as it is the partners who are taking the risks. A partnership can sue (and be sued) in its own name even though it is not an artificial person. Can change s19 of the Partnership Act 1890, but all partners must agree (s24 of the Partnership Act 1890). Can change provision of the 1890 Act e.g. s24 profit and losses shared equally, but partners may provide for a different share (e.g. +: + profit liability) in their agreement. If no evidence of split, their split will be equal. Every partner has legal access to inspect and copy firms books s24 (9) Partnerships Act 1890. Differing salaries may be given to partners before surplus profit is split. No doctrine of ultra vires and partnership may engage in any lawful

activity as the partners see fit. Able to access knowledge and experience of the partners. Limited to maximum of 20 people by Companies Act 1985, some professions are exempt and can have partnerships of unlimited size (e.g. solicitors, accountants, estate agents, stock brokers). Partnerships are jointly and severally liable for debts. Liability extends to private assets/personal fortune. Bankruptcy of partnership equals bankruptcy of all partners (excluding limited partners under the Limited Partners Act 1907). If a partner dies, his estate may still be liable for the businesses debts. Unless specific continuation provisions are made in the agreement, death, bankruptcy or retirement will dissolve the partnership. Less flexibility than a limited company, in transferring ownership.

High level of trust required. Whether drawn or not, the profits are taxed as income. Self-employed national insurance entitlements have less benefits. Tax relief on pension contributions is restricted. Partners can be sued individually, or together by a creditor that has not been paid. However remaining partners must buy out the share of the deceased, bankrupt or retiring partner and it may be difficult to raise the necessary funds. The Business Names Act 1985 requires the names of all the members of a partnership and addresses in Great Britain where documents can be served, must be stated at all business premises so they can be easily read. Also all names must go on letterheads/documents. If more than 20 partners, the firm may elect to have a statement on letterheads/documents

of the firms principle place of business with indication that the partners names can be inspected there. Partnership will be in contract if a partner without the relevant authority binds them to it (apparent (ostensible) authority). The partnership is bankrupt if all the partners are also bankrupt (excluding a limited partner under the Limited Partnership Act 1907. Limited Company There are many factors that are the same for a LTD and a PLC so these will be covered first and then the individual factors will be looked at later. The company is considered by law as an artificial legal person and has an independent legal and tax status. Therefore it can sue and be sued in its own name. As the company is independent of its members, there is limited liability for its shareholders who

just risk the amounts invested. Unlike a sole trader and a partnership, the company owns the assets. The death or bankruptcy of a member does not affect the company, which has perpetual succession. Also, the members do not go bankrupt if the company is being wound up. To provide funds for the company shares are issued, which can have different classes and rights (e.g. preference shares and equity shares). Only company directors can bind the company. There is no upper limit restricting the number of members a company can have. A company has a greater facility for borrowing (e.g. it can borrow on debentures) and raising finance externally. The formalised structures make management clearer. It is easier to widen the ownership base. There are no limits regarding contributions made to

a pension scheme with tax relief. Income tax is only paid on salaries drawn. When profits are retained in the company the higher rates of personal tax can be avoided. It is very time consuming and expensive to set up as a company. There is a complex registration registering under the Companies Acts, documents must be delivered to the Registrar of Companies and there are many related fees. The companies must conform to the relevant formalities of the Companies Act 1985. There are many requirements concerning factors such as the accounts and records, audits, share issues, directors requirements etc. The accounts and records must be made accessible to the public so competitors will have access to them. Company subject to regulation and suspension from secretary of state for trade