Advantages and Disadvantages O

1850 WordsSep 29, 19998 Pages
Introduction There are many types of organisational structure a business may decide to adopt. This assignment will examine the four main different business structures and present the advantages and disadvantages of each one. The business structures that I will be examining are as follows: The Sole Trader The partnership The Private Limited Company (LTD) The Public Limited Company (PLC) Sole trader A sole trader is an organisation, which is owned by one person. The assets and liabilities of the owner and those of the business are the same. There are no legal or tax distinctions between the owner and business. This type of business is straightforward to set up and dissolve. It requires the minimal legal…show more content…
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. ¾: ¼ 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.

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