Choosing the best legal structure orbusiness type is become an important decision in the start-up process, since itdirectly affects to the company’s goals and objectives. Limited company is a company which isregistered under the company act no: 7 of 2007, with interminable existence,owned by shareholders and raising capital by issuing shares. Partnership can be defined as a businesswho are conducted by two or more people with a target of attain profit. In order to provide recommendationsstrength and weakness of Partnership and Limited Company as follows; 1.
1 Strength& Weaknesses of a Limited Company Strengths Legal personality – Limited Company can be considered as a legal person. Company act as a free-standing entity from its owners. This will admitted to enter company to acquire assets, contracts & pay taxes in its name. Responsibility for business debts – The liability which is hold by shareholders are limited since the responsibility for debts are kept within the company , none of the shareholders is personally liable. Interminable Existence – The company has an interminable existence where it doesn’t unsettled by the death of shareholder, mental disorder or bankruptcy. Raise more capital – It provides opportunity to raise more capital by issuing higher number of shares. Tax Flexibility – It gives greater tax flexibility which become an advantage in making right decisions at the end of the year.
Weaknesses Inability Raise capital at the beginning – Even though it is able to raise capital by issuing shares, it shows less progress at the beginning Complexity of legal provisions – This legal structure provides higher level of legal provisions in conducting business. Profits & ownership – When there large no of shareholders all the profits and ownership need to be shared. Complex Accounts – Higher Accounting cost should be broned. Professional Accountants are vital.
Difficulties in withdraw money from the company 1.2 Strengths & Weaknesses of Partnership Strengths Easy to commence – Due to low regulations, Partnership businesses are easy to commence A pool of different skills of partners –Special ,different skills of partners can be utilized Shared Responsibility – Losses can be shared among partners using a ratio instead of holding losses in an unequal manner. Liability which arising from Partnership Business is also shared among partners. High flexibility –Provides higher flexibility to manage the business since it has low strict regulations.
More Capital –More capital can generated by involving more partners investing in the company lead to business growth. Weaknesses Instable existence- A partnership can be terminated due to a death of partner or partner is having a mental disorder Unlimited liability – Partners are unlimitedly liable for the business. If the business is not ample to pay off debts , partners are responsible to pay off debts even by sacrificing their private properties No legal personality –Partnership do not have legal personalit, partners have to use their personal names. Shared Profit – Partners have to share the profit according to profit sharing ratio.
Dispute among partners –When expanding business for different reasons, more partners involved with different opinions tend to increase disagreements. 2. FinalRecommendation My recommendation is to start as apartnership, taking easy to commence advantage gain more capital and expand itas a Limited company by taking the advantages of legal personality,interminable existence and limited liability.
1. Distinctionbetween Financial accounting & Management accounting Financial accounting is the type ofaccounting which analyse and classifies the monetary transactions of a business according to the accountingstandards. Management accounting is prepared to provide information to managersto conduct day to day operations of the entity including monetary and non-monetary transaction.The main objective of financial accountingis to provide useful information to itsstakeholders which is a compulsorydocument prepared annually, whereas management accounting is prepared for internal use which is not compulsory.