TYPES OF BUSINESS
According to the above case it is better we form partnership business whereby it require two members to start and we share loss and profits,also we make equal contribution of capital which has more advantages for us; partnerships are incorporated businesses. Like corporations, partnerships are separate entities from the shareholders. Partnerships must have at least two shareholders. Partnerships distribute all profits and losses to their shareholders without regard for any profits retained by the business for cash flow purposes. Some of advantages of partnership include ease to form since it require just two people ,starting capital is low which can be easily raised by the members, additional sources of venture capital, broader management this will assist to share ideas and limited outside regulation as compared with corporations .Also partnership unlimited personal liability, lack of continuity in case one partner dies,divided authority since partner think differently , difficulty in raising additional capital since members are a few and hard to find suitable partners to do business with. To prove the existence of partnership, three elements must be present: there must be business, there business must be carried on in common and there business must be carried with a view of making and sharing profits, thus an association of persons to form asocial club is not a partnership.
A partnership may be formed by any kind of agreement, simple or under deed or it may even be implied from the conduct of the parties concerned. Although partnership agreements do not have to be formal they are usually in writing and the document containing such agreement is deed of partnership drafted by a lawyer. The contents of the deed contain the following items: The names of persons to the partnership, the nature and place of business and the name of the firm ,the date which partnership is to commence and the of its duration ,if any the amount of the firm’s capital and amount of interest to be paid on loans ,the banking account and who is to sign documents ,how to share management, details of the manner in which accounts will be kept and also provision for the audit of the accounts, the provisions, the provision as to whether the firm will continue its business after retirement, death or insolvency of a partner and finally arbitration clause usually included in the partnership agreement to provide for any future disagreement between the partners. The relationship of partners comes into existence by mutual agreement and the rights and liabilities of partners between themselves are primarily governed by their partnership agreement; but if this is silent on any particular matter, reference is made to the provisions of partnership Act, which states that ;all partners are equally entitled to share in capital and profits of the business, and must contribute equally towards the losses of the firm, a partner is entitled to an indemnity from the firm for any payment made or personal liability incurred in the ordinal and proper conduct of the firm’s business or property, a partner is entitled to interest at six per cent per annum on any money he lends to the firm other than the capital he originally agreed to subscribe, every partner is entitled to participate in the management of the business ,every partner is entitled to oppose the introduction of a new partner, every partner is entitled to have access to the partnership books, on the dissolution of a partnership, every partner has an equitable lien over the firm’s property to ensure that it is used for the payment of the firm’s debts and then divided among the partners, on the dissolution of a partnership, after payment of debts each partner is entitled to-repayment of any loan he made to the firm, repayment of any capital he has put into the firm, share in the residue in the same proportion as he share in the profits.
There are also two other types of business that people may engage in, namely sole proprietor and corporation. Sole proprietors are unincorporated businesses. They are also called independent contractors, consultants, or freelancers. There are no forms you need to fill out to start this type of business. The only thing you need to do is report your business income and expenses for tax purposes. This is the easiest form of business to set up, and the easiest to dissolve. Sole proprietor as both advantages and disadvantages, some of advantages include Low start-up capital, greatest freedom from regulation, and direct control by owner, minimum working capital requirements, and tax advantage to small owner, since is taxed together as one income and all profits to owner without sharing with anybody. Also some of the disadvantages Lack of continuity in case the owner dies and very difficult to raise capital for starting a business.
Corporations are incorporated businesses. Every form of business besides the sole proprietor is considered a separate entity, and this often provides a measure of legal and financial protection for the shareholders. The shareholders of corporations have limited liability protection, and corporations have full discretion over the amount of profits they can distribute or retain. Corporations are presumed to be for-profit entities, and as such they can have an unlimited number of years with losses. Corporations have advantages and disadvantages, some advantages include Limited liability, specialized management, ownership is transferable, continuous existence ,Legal entity easier to raise capital ,unity of action account havingcentralized authority in board of directors and disadvantages include :closely regulated ,most expensive to organize ,charter restrictions ,extensive record-keeping necessary ,double taxation thus is corporation and individual and difficult to liquidate investment
1) Saleem, Commercial Law (1998)
2) Ashiq Hussain. General Principles And Commercial Law (1978)