The three main business organisation structures considered by Steve and Wonder are partnerships, trusts and companies. In order to understand the key differences between the three and to put forward a recommendation for the most apt structure, it is essential to grasp the basic definition of each . A partnership is an association of two or more people who typically know and trust each other and therefore come together to set up and carry on a business. The partners have an equal control over the company’s affairs and typically contribute an equal capital amount. Incomes and losses are also equally shared . A trust is an obligation given to an appointed person, the trustee, to hold the assets and property of the business on behalf of the …show more content…
Another important factor is control. The company can be a public company or a private company. A public company’s shares are floated on the stock exchange while a private company’s shares are held by a very small group of shareholders who are mostly all close friends or family members. For Steve and Wonder, since they want to retain maximum control, it makes sense to have a private limited company and serve as it directors. They could keep the management in their hands or appoint a manager for day-to-day decision while keeping the major decision to themselves. Although there are different types of trusts allowing different degrees of control to the trustee, the fact remains that the trustee alone has the discretion to distribute income and make profit distribution decisions. The procedures are therefore less flexible. Financing is the third major factor for Steve and Wonder. Companies are easier and more flexible when it comes to raising investment and funding – since equity can be sold to raise money. Steve and Wonder are currently short of $500,000 worth of capital for their business. Once they register their business as a limited liability company, they can raise this capital through selling shares of the company to friends and family. They can control the number and nature of shares to ensure maximum control and efficiency. In return, they can promise a dividend return or profit share to all the owners. Flexibility is also a
The three main organizational forms used in forming a business are sole proprietorship, partnership and corporation.
A partnership is an arrangement between two or more groups, organizations or individuals who work together to achieve common aims or who have common interests.
A partnership is the creation of two or more people who operate a business as co-owners and share profits. There is a collective amount of money that is contributed to the organization as it pertains to all aspect of the business and in return each individual share equally the profits and losses of the business. Partnerships require that there be a partnership agreement established because more than one person can make decisions for the partnership. The agreement should include how future business decisions will be made, the profits will be split among the partners, and the dissolving of the partnership (sba.gov). The partnership must file an annual information return that reports income, deductions, gains, and losses that occur from normal business operations. The business does not pay income taxes but the business pass through any profits and losses to its partners. Taxes that are included in a partnership are: employment tax, excise tax, annual return of income, income tax, self-employment tax, and estimated tax. Other qualifications of a partnership is that partners must furnish a copy of their Schedule K-1 form to all the partners by the date of the Form. It is important to remember that partners are not employees and they are not to be issued a W-2 Form.
A Partnership is a business form that consists of two or more individuals. There are two types of partnerships; general and limited. General partners are liable for the full extent of debts and obligations within the business. Limited partnerships provide individuals with a limitation of responsibilities in the organization’s liability; this type of partnership is dependent upon the investment percentage. Advantages of partnerships consist of cost efficiency, shared financial responsibility, complementary skill association, and offer employees partnership incentives. Disadvantages of partnerships are joint and individual liability, disagreements between partners, and shared profits (“U.S. Small Business Administration,” 2013).
This will be the best business organization structure for your company. It is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.
Partnership is the relations which exists between partners carrying on a business in common with a view of profit, which means there must be some continuity or repetition of trading activities and working on behalf of each other. (James 2014, p. 506-507)
A partnership is a business organization where the partners own the business together and are
A partnership is a relationship where by two organizations co-own and share resources, costs and benefits in order to coexist. There are there main types of partnerships as explained below
A corporations is very different from sole proprietorships and partnerships. Corporations are owned by shareholders and are considered to be an independent legal entity. Corporations have very expensive administration fees and very complex tax and legal requirements. The main advantage of corporations is that the shareholders are not responsible for the debts of the company. They are only liable for their investment into the company. Corporations can also sell stock to raise any capital that is needed for the business. Corporations file a separate taxes from that of the owners. Owners of a corporation are taxes on the profits that the receive through salaries, dividends and bonuses. One major disadvantage of a corporation is that they are very costly and time consuming to start and maintain. Sometimes corporations can be subjected to double taxes through taxes on profits and then taxes on dividends. Corporations require an increased amount of paperwork and record keeping. A final disadvantage of this kind of business structure is that the business operations are handled by the managers and the board of directors who can cheat the owners of the business (Parrino et al., 2012).
A partnership, Consists of two or more people who share the ownership of a single business. Like in a proprietorship, the law does not distinguish between the business and its owners. The Partners should have a prearranged agreement of how decisions will be made for their company, the profits will be shared, how disputes will be resolved, how new partners will be brought into the partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed. Although it sounds silly thinking about dissolving the company before its started, many companies break up in times of
A partnership is when there is a contract amongst two or more people to invest and run a business. Each individual partner has the equivalent responsibility and power to make decisions and manage the business. It is necessary each associate takes part in daily tasks of the business and share responsibilities between each other in order to develop a successful partnership. “The joint ownership concept that describes a business partnership gives it certain distinct advantages and disadvantages”. (Partnership advantages and disadvantages, no
Partnership is the relation which subsists between persons carrying on a business in common with a view of profit. There are four conditions in which all must be satisfy are the followings:
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
A partnership is a relation between two or more individuals who contribute their resources for the achievement of a specified outcome, commonly profit such as in Hope v Bathurst City Council (1980) 144 CLR 1 . These small businesses are characterized by mutual cooperation, responsibility and obligation . The partnership firm is governed by the Partnership act 1891 where registration of
Partnership is an arrangement between the parties and cooperates to carry on the business with mutual benefits and interest. For determining partnership, there must be a valid contract, should posses mutual rights, agency, interest and obligations with the view of making profit. The characteristics of partnership are unlimited liability where the members of the company are legally bound for paying the debt while dissolving of the company. When two or more people enter into a contract to share the liabilities, risk and profit of a business firm is known as partnership. Partnership also includes incorporated limited partnership, which means that one of the partners has limited liability among the various partners involved in the company.