Legal Forms Of Business

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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