Characteristic of partnership

Number of Persons. There are at least two partners if the business is of ordinary nature than minimum
partner are 2 and maximum is 20. While in case of banking organization minimum are 2 and maximum
number of partners is 10.
Management and Control. In partnership business organization all the partners can take part in
managing the business. However, they may elect any one of them as their representative in partnership
agreement.
Unlimited Liability of Partners. Partners Liability is unlimited, if facing insolvency the assets are not
sufficient to fulfill the liabilities then creditors have the right reserved to sue the partners. Liabilities if any,
must be considered as the liabilities of the partners according to legal status of business. It means in case
of insolvency of the business, their personal properties can be sold for the recovery of all its debts.
Taxation. It enjoys the tax advantages over other forms of business organizations. For the purpose of
income tax owners and business are treated as same thing. Income from its operations is treated as the
personal income of the partners. There all are personally liable to pay the tax to the government, if
income becomes taxable.
Flexibility. It is less flexible as compare to sole proprietorship due to more owners, more resources and
difference of opinion among the partners.

Advantages

Advantages of a partnership include that:

two heads (or more) are better than one
your business is easy to establish and start-up costs are low
more capital is available for the business
youll have greater borrowing capacity
high-calibre employees can be made partners
there is opportunity for income splitting, an advantage of particular importance due to resultant tax
savings
partners business affairs are private
there is limited external regulation
its easy to change your legal structure later if circumstances change.

Disadvantages

Disadvantages of a partnership include that:

the liability of the partners for the debts of the business is unlimited
each partner is jointly and severally liable for the partnerships debts; that is, each partner is liable for
their share of the partnership debts as well as being liable for all the debts
there is a risk of disagreements and friction among partners and management
each partner is an agent of the partnership and is liable for actions by other partners
if partners join or leave, you will probably have to value all the partnership assets and this can be costly.
 Characteristic of Corporation
Separate existence. A corporation through legal fiction has it own legal existence and with that
existence come economic rights. Some of those rights are: the right too enter into a contract; due
process protection of corporate assets against state and federal government takings; freedom of
commercial speech in the form of advertisements; and equal protection of the Fourteenth Amendment.
A corporation does not have individual rights such as: the 5th amendment right to protection against
self incrimination, the 4th amendment protection against unreasonable search and seizure or the 1st
amendment protection of political free speech. Because of this separate existence created by legal
fiction, a corporation can exist beyond the lives of its shareholders.

Centralized management. Corporate law provides an organizational structure to operate the business
and the capital of many individuals. The basic structure is as follows. Shareholders are the owners of the
corporation, directors are elected by the shareholders and are the locus of power. Directors appoint the
corporate officers. Directors approve policy and procedures of the operations of the corporation.
Corporate officers carry on the day to day activities of the corporation and serve at the pleasure of the
board of directors.

Transferability of ownership interest. The issuance of shares creates a kind of currency in with value
based on the assets owned by the corporation or the financial performance of the corporation. Shares
facilitate transferability of ownership. This enhances the marketability of the entity and allows for an
exit strategy for the owners.

Limited liability. A corporation shields its owners from personal liability for the debt of the corporation.

Advantages of a Corporation

A corporation is a legal entity, organized under state laws, whose investors purchase shares
of stock as evidence of ownership in it. The advantages of the corporation structure are as
follows:

Limited liability. The shareholders of a corporation are only liable up to the amount of their
investments. The corporate entity shields them from any further liability.
Source of capital. A publicly-held corporation in particular can raise substantial amounts by
selling shares or issuing bonds.
Ownership transfers. It is not especially difficult for a shareholder to sell shares in a
corporation, though this is more difficult when the entity is privately-held.
Perpetual life. There is no limit to the life of a corporation, since ownership of it can pass
through many generations of investors.
 The disadvantages of a corporation are as follows:

Double taxation. Depending on the type of corporation, it may pay taxes on its income, after
which shareholders pay taxes on any dividends received, so income can be taxed twice.
Excessive tax filings. Depending on the kind of corporation, the various types of income and
other taxes that must be paid can require a substantial amount of paperwork.
Independent management. If there are many investors having no clear majority interest, the
management team of a corporation can operate the business without any real oversight from the
owners.
SOLE PROPRIETORSHIP CHARACTERISTICS
CHARACTERISTICS

Business Ownership

Being one man show the sole owner manages and controls all the affairs of the business independently,
without the interference of any other person. He is the planner policies and decision maker for the
success of his business.

No Legal Status of the Business

Sole Proprietorship has no separate legal entity from its owner. Owner and business is same thing in the
eyes of law and public. Obligations of the business must be considered as the obligations of the sole
owner. Similarly life of the business depends upon the life of the proprietor. It means in case of mishaps
in the life of sole proprietor, may end the life of the business.

Unlimited Liability

According to legal status, business liabilities must be considered as the liabilities of the owner. Hence,
the liability of the owner is unlimited. It means in case of insolvency, personal property of owner can be
sold for the recovery of its debts.

Taxation Liability

Being a separate business entity, proprietor is not required to file taxes under employee identification
number. Business income is considered as the personal income of the proprietor for taxation. Hence,
owner is liable to pay taxes to Income Tax Department, if income becomes taxable

Accounting Status of the Business

Sole proprietorship also known as entity principle. According to this principle, owner and business are
two different entities for record keeping purpose. Record of transactions must be kept separately from
the personal transactions of the owner, in order to check the true results of business operations.

Secrecy

There are many factors behind the success of business like production techniques, sales, marketing and
distribution strategies etc. The secrecy of business factors are very important in order to remain
competitive in the market. Because the ownership is in the hands of single person, hence there are less
chance of opening its secretes.

Flexibility

Sole proprietorship is very simple to change the nature of business according to change in market trends
due to entire control and less resources. For example, a person who is doing the business of fast food
may involve in the business of cloth at night.
Risk

The sole proprietorship bears all the business risk. Unlike partnership and corporations, it has less
restrictive regulations. Sole proprietor is not bound the charter the business though he is required to
register business name its operations and activities

Advantages of a Sole Proprietorship

A sole proprietor has complete control and decision-making power over the business

Sale or transfer can take place at the discretion of the sole proprietor

No corporate tax payments

Minimal legal costs to forming a sole proprietorship

Few formal business requirements

Disadvantages of a Sole Proprietorship

The sole proprietor of the business can be held personally liable for the debts and
obligations of the business. Additionally, this risk extends to any liabilities incurred
as a result of acts committed by employees of the company. For that reason, it is
usually more advisable to start a business as a corporation or LLC rather than as
a sole proprietorship.
All responsibilities and business decisions fall on the shoulders of the sole
proprietor.
Investors wont usually invest in sole proprietorships.
Sole proprietorships

A sole proprietorship is a business that is run by a single individual who makes all the
decisions, although the proprietor may engage employees. The sole proprietor is personally
entitled to all of the profits and is responsible for any debts that the company incurs.

Advantages of forming a sole proprietorship

Sole proprietorship is the simplest and most flexible business structure.

The sole proprietor has total control and full decision-making power over policies,
profits and capital investment.
It is easy to close down the business.
Profits from the business will be taxed at the sole proprietor's marginal tax rate,
which may be lower than the corporate (limited company) tax rate. Also, business
losses can be offset against the other income of the proprietor.

Disadvantages of forming a sole proprietorship

Risks that are taken by the sole proprietor may result in personal bankruptcy.
The death or prolonged illness of the sole proprietor will lead to the end of the
business.
Due to the limitations of a one-person business, the sole proprietor may not be able
to raise additional capital from outside sources to expand the business.
Partnerships

A partnership is the relation which subsists between persons carrying on a business in

common with a view of profit. The law relating to partnership is codified under
the Partnership Ordinance, Cap. 38.

However the relation between members of any company or association which is (a)
registered as a company under any Ordinance relating to the registration of joint-stock
companies; or (b) formed or incorporated by or in pursuance of any other Ordinance, or any
enactment or instrument is not a partnership within the meaning of the Partnership
Ordinance.

Unlike a limited company, each partner in a partnership is personally liable for the acts of
the other partners and for all of the debts of the company. On the other hand, all partners
are entitled to share in the profits of the company equally unless they agree otherwise.

The transfer of interests in the company to existing or new partners may be carried out in
accordance with the Partnership Agreement or other agreement that is entered into by all of
the partners. In practice, there is little market for the transfer of the interests of a partnership
to public investors.

The name of a partnership can be formed by combining the names (usually the surnames)
of the partners. If there are many partners, then they may name the company "XX
Company" or "XX & Co". However, they must not include the words "limited" or "company
limited",as this is an offence that carries a fine. Note that a partnership can also use a
business name or trade name (for example, XX Caf) in addition to the partnership name.

It is important for the partners to prepare a Partnership Agreement that contains provisions
for profit sharing, control and the settling of managerial and policy disputes. You are
strongly recommended to appoint a lawyer to prepare the Partnership Agreement.

Advantages of forming a partnership

It is easier to raise finance as a partnership than as a sole proprietor.

Partners pay tax on their share of the partnership profits at their respective marginal
tax rates, and their share in the partnership losses can be offset against their other
income .

Disadvantages of forming a partnership

Partners do not have the benefit of limited liability.

The participation of all the partners is needed for most legal transactions, which can
result in disputes among the partners.
The partnership will be dissolved when a partner dies or becomes bankrupt, unless
the Partnership Agreement states otherwise
 CHARACTERISTICS OF CORPORATION

Separate existence. A corporation through legal fiction has it own legal existence and
with that existence come economic rights. Some of those rights are: the right too
enter into a contract; due process protection of corporate assets against state and
federal government takings; freedom of commercial speech in the form of
advertisements; and equal protection of the Fourteenth Amendment. A corporation
does not have individual rights such as: the 5th amendment right to protection
against self incrimination, the 4th amendment protection against unreasonable
search and seizure or the 1st amendment protection of political free speech.
Because of this separate existence created by legal fiction, a corporation can exist
beyond the lives of its shareholders.
Centralized management. Corporate law provides an organizational structure to
operate the business and the capital of many individuals. The basic structure is as
follows. Shareholders are the owners of the corporation, directors are elected by the
shareholders and are the locus of power. Directors appoint the corporate officers.
Directors approve policy and procedures of the operations of the corporation.
Corporate officers carry on the day to day activities of the corporation and serve at
the pleasure of the board of directors.
Transferability of ownership interest. The issuance of shares creates a kind of
currency in with value based on the assets owned by the corporation or the financial
performance of the corporation. Shares facilitate transferability of ownership. This
enhances the marketability of the entity and allows for an exit strategy for the
owners.
Limited liability. A corporation shields its owners from personal liability for the debt
of the corporation.

advantages of the corporation structure are as follows:

Limited liability. The shareholders of a corporation are only liable up to the amount of their
investments. The corporate entity shields them from any further liability.
Source of capital. A publicly-held corporation in particular can raise substantial amounts by
selling shares or issuing bonds.
Ownership transfers. It is not especially difficult for a shareholder to sell shares in a
corporation, though this is more difficult when the entity is privately-held.
Perpetual life. There is no limit to the life of a corporation, since ownership of it can pass
through many generations of investors.
 The disadvantages of a corporation are as follows:

Double taxation. Depending on the type of corporation, it may pay taxes on its income, after
which shareholders pay taxes on any dividends received, so income can be taxed twice.
Excessive tax filings. Depending on the kind of corporation, the various types of income and
other taxes that must be paid can require a substantial amount of paperwork.
Independent management. If there are many investors having no clear majority interest, the
management team of a corporation can operate the business without any real oversight from the
owners.
BASIC FINANCE SEPT 11,2017

SUB BY: PALICAS SHEM D.

SUB TO: PROF. FLORES RENEE ROSE B.

BASIC FINANCE SEPT 11,2017

SUB BY: CORPUZ RINA A.

SUB TO: PROF. FLORES RENEE ROSE B.