Legal Forms Of Business
Essay by 24 • March 30, 2011 • 589 Words (3 Pages) • 1,454 Views
Partnerships
Definition
"Relation which subsists between persons carrying on a business with common view to profit"
In a Partnership:
* You want it to be really easy to set up
* You can lose all your money and even your possessions if you fail
* You want to keep all you financial affairs private
* You want to share control with a few other people
* You want to share profits with a few other people
* You want other people to be able to make decisions without consulting you, even though you may lose money because of this
* You want to be able to sell your business to someone else
Deed of Partnership
This is a legal document that states partners' rights in the event of a dispute, it covers the following issues:
* How much capital each partner will contribute
* How profits and losses are shared amongst the partners
* The procedure for ending a partnership
* How much control each partner has
* Rules for taking on new partners
Financing
A firm might find that each partner specialises in one aspect of finance, for example: tax, law, investments, or VAT returns.
Control
The size of a partnership is limited to a maximum of 20 partners with a minimum of two. All partners have a certain amount of control within the business, but some have more than others do.
Advantages of a Partnership
* There are no legal formalities to complete when setting up
* Each partner can specialise in the tasks they do best
* More finance can be raised than if the firm was a sole trader
* Partners can share the workload
* Since the type of business is larger than a sole trader it is in a s stronger position to raise more money from outside the business
Disadvantages of a Partnership
* The individual partners have unlimited liability
* Profits have to be shared amongst more owners
* There may be conflicts of interest amongst partners
* The size is limited to a maximum of 20 partners
* The partnership ends when a partner dies
* Any decisions made by one partner is legally binding on all partners
Examples
Partnerships are often found in accountants, doctors, estate agents, solicitors, and veterinary surgeons.
Sole Trader
Definition
A Sole Trader is a company owned, financed
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