Partnership vs. Limited Company: Key Differences and Business Structures
What is a partnership?
A partnership refers to two business partners sharing joint responsibility for a company.
Unless a partnership agreement explicitly dictates otherwise, partners are jointly responsible for all losses and profits in the business, and both pay taxes on their share of profits.
Unless a partnership agreement explicitly dictates otherwise, partners are jointly responsible for all losses and profits in the business, and both pay taxes on their share of profits.
Partners also share responsibility for all liabilities and debts associated with the business as individuals, and any bills for assets like stock and equipment.
However, a partnership does not legally have to be between two actual people. Somebody could register a limited company as a partner because a limited company is considered a “legal person” by the government.
To set up a business partnership, the founder only needs to choose a name for the partnership, a “nominated partner” (whether another person or a limited company), and to register the business with HMRC.
What is a limited company?
The central feature of a limited company is the legal separation from those who run it. For example, its directors are not liable for company debts. Financial responsibility lies with its shareholders.
Although day-to-day running of a limited company is the responsibility of its directors, it is legally owned by its shareholders. Shareholders and directors may be completely different people.
Usually, a shareholder’s liability is proportionate to the price paid for their shares. If a limited company was to fold, the most a shareholder would lose is the amount paid for their shares.
A limited company operates within its own right, and can employ staff, own property and enter legal disputes as its own entity.
differences
*The key differences between a partnership and a limited company lie in the structure.
*While owners of a business partnership are liable to the company’s debts, directors of a limited company are not personally responsible.
*For a young company, the partnership structure is often favoured for tax purposes. Rather than receiving a salary , partners take earnings from the company’s profits (sales).
*A limited company, on the other hand, must pay corporation tax on its income to HMRC, and file annual returns at Companies House.
*If a business partnership is highly successful, its partners could see a great financial benefit. However, personal finances are on the line, and if the business went under, financial stability – whether it’s mortgages or savings – is at risk.
*In a general partnership, all partners are fully liable for the business’s debts.
*In a limited partnership, only some partners are personally liable. These are the general partners. Other partners, known as limited partners, are not personally responsible for business debts. However, limited partners generally don’t play an active role in running the business.
*The “limited” in a limited company refers to liability. Responsibility for debts lies with the company itself, so none of the owners is personally liable. Their potential losses are limited to what they’ve invested in the company, but no more.
Public limited companies This form of business organisation is most suitable for very large businesses. Most of the businesses which are well known to the public because they own large chains of shops or many factories are public limited companies.
Students commonly make two mistakes about public limited companies. by the government but by private individuals or private businesses and as a result they are in the private sector of industry.
Public limited companies This form of business organisation is most suitable for very large businesses. Most of the businesses which are well known to the public because they own large chains of shops or many factories are public limited companies.
Students commonly make two mistakes about public limited companies. by the government but by private individuals or private businesses and as a result they are in the private sector of industry.
Private limited companies There is one essential difference between a company and an unincorporated business, such as a sole trader or partnership. A company is a separate legal unit from its owners this means that:
a company exists separately from the owners and will continue to exist if one of the owners should die * a company can make contracts or legal agreements* company accounts are kept separate from the accounts of the owners
A sole trader
is one individual person who owns and runs a business on his or her own. They may have a business name, e.G. Joe Bloggs trading as Bloggs Enterprises or may trade under their own name. The sole trader may employ its own staff but all contracts, including those made in the course of trade will be in the trader’s own name. The trader has unlimited personal liability for the business so he or she can be sued for the actions of the business and will personally carry all the debts of the business.
point difference sole trader partnership
1. Legal FormalitiesNo legal formalities have to be followed for starting the business.-Few legal formalities to be followed for starting the business.
2. LegislationIt is not controlled by any legislation.-It is regulated by Partnership Act, 1932.
3. No. Of MembersIt is totally one man’s business.-There should be atleast two members. Maximum number of members is 20 in case of general business and 10 in case of Banking business.
4. AgreementIt does not require any agreement as there is only one member.-Agreement or Deed either in writing or oral is necessary.
5. SecretsBusiness secrets can be maintained.Business secrets cannot be maintained.
6. CapitalSupply of capital is limited.-More capital can be secured.
disadvantages Containerization
Site constrains. Containers are a large consumer of terminal space (mostly for storage), implying that many intermodal terminals have been relocated to the urban periphery.
Capital intensiveness. Container handling infrastructures and equipment (giant cranes, warehousing facilities, inland road, rail access) are important capital investments that require readily sources.
Stacking. Complexity of arrangement of containers, both on the ground and on modes (containerships and double-stack trains)
Repositioning. Many containers are moved empty (20% of all flows). However, either full or empty, a container takes the same amount of space.
advantages Containerization
Standardization. Standard transport product that can be handled anywhere in the world (ISO standard) through specialized modes
Flexibility. Can be used to carry a wide variety of goods such as commodities (coal, wheat), manufactured goods, cars, refrigerated (perishable) goods
Costs. Lower transport costs due to the advantages of standardization.
Velocity. Transshipment operations are minimal and rapid and port turnaround times have been reduced from 3 weeks to about 24 hours.
Warehousing. The container is its own warehouse, protecting the cargo it contains.
Growth
Most small companies have plans to grow their business and increase sales and profits. However, there are certain methods companies must use for implementing a growth strategy. The method a company uses to expand its business is largely contingent upon its financial situation, the competition and even government regulation. Some common growth strategies in business include market penetration, market expansion, product expansion, diversification and acquisition.The owners and managers of a business may aim for growth in the size of the business for a number of reasons
to make jobs more secure if the business is larger
to increase the salaries and status of managers as the businessexpands
to open up new possibilities and help to spread the risks of thebusiness by moving into new products and new markets
to obtain a higher market share from growth in sales .
to obtain cost advantages, called economies of scale, from business expansion.
INTERNAL GROWTH Occurs when a business expands its existing operations,
EXTERNAL GROWTH is when a business takes over or merges with another business. It is often cailed INTEGRATION as one firm is integrated into another one.
A FRANCHISE
Franchising is simply a method for expanding a business and distributing goods and services through a licensing relationship. In franchising, franchisors (a person or company that grants the license to a third party for the conducting of a business under their marks) not only specify the products and services that will be offered by the franchisees (a person or company who is granted the license to do business under the trademark and trade name by the franchisor), but also provide them with an operating system, brand and support.
Stage 1 is called the primary stage of production. This stage involves
the earth’s natural resources. Activities in the PRIMARY SECTOR of industry include farming, fishing, forestry and the extraction of natural materials, such as oil and copper ore.
Stage 2 is called the secondary stage of production. This stage involves taking the materials and resources provided by the primary sector and converting them into manufactured or processed goods. Activities in the SECONDARY SECTOR of industry include building and construction, aircraft making, computer assembly and baking.
tage 3 is called the tertiary stage of production. This stage involves providing services to both consumers and other businesses. Activities in the TERTIARY SECTOR of industry include transport, banking, insurance, hotels and hairdressing
FREE MARKET ECONOMY (also known as a MARKET ECONOMY) all resources are owned privately. There is no government control over land, capital and labour. Businesses produce goods to make a profit. They make more of the more profitable goods
Advantages Consumers are free to choose what they want to buy. Workers are encouraged to work hard as they can keep most or all of their incomes because of low or non-existent taxes.
Businesses compete with each other and this could keep prices low. 2 New businesses are encouraged to set up in order to make profits
disadvanteges : Poor Quality Since profit maximization is the biggest motivation for firms, they may try to reduce their costs unethically by polluting the environment or by exploiting workers.
Goods and services that are not profitable will not be produced/run. Rural communities will suffer as a result
-Firm PowerLarge firms can still dominate certain markets, even where there is competition, and exploit suppliers
COMMAND or planned ECONOMY, the government or the state plans and controls the use of resources. There might be no private property at all. The government decides what is to be produced and in what quantities. Consumers have little choice and workers could be told where to work and what work to perform /Advantages *Government control should eliminate any waste resulting from competition between firms. *There should be work for everybody. *The needs of the population are met, but there is little production of
luxury goods for the wealthy/ Disadvantages*There is less incentive to work as the government fixes wages and private property is not allowed.*The government may not produce goods which people want to buy. * The lack of a profit motive for firms leads to low efficiency
Miedeconomy Mixed economy is referred to the economic system in which both public sector and private sector coexist. In this type of economic system, private sector as well as the state direct the economy and the means of production is shared between them. This economic system exhibits characteristics of both market economy and planned economy. Mixed economy can be best described as the market economy where there is a strong regulatory oversight and which has many government enterprises and government provision of public goods.
A NEED is a good or service essential for living
A WANT is a good or service which people would like to have, but which is not essential for living. People’s wants are unlimited
The ECONOMIC PROBLEM results from there being unlimited wants bui limited resources to produce the goods and services to satisfy those wants. This creates scarcity
FACTORS OF PRODUCTION are those resources needed to produce goods or services. There are four factors of production and they are in limited supply.
SCARCITY is the lack of sufficient products to fulfil the total wants of the population.
VALUE ADDED is the difference between the selling price of a product os service and the cost of bought in materials and components.
OPPORTUNITY COST is the next best alternative given up by choosing another item.
BUSINESSES combine factors of production to make products (goods and services) which satisfy people’s wants.
BUSINESS OBJECTIVES are the aims or targets that a business works towards.
A STAKEHOLDER is any person or group with a direct interest in the performance and activities of a busines
The TERTIARY SECTOR of industry provides services to consumers and the other sectors of industry
DE-INDUSTRIALISATION Occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country
A MIXED ECONOMY has both a private sector and a public (state) sector.
A MONOPOLY is a business which controls all of the market for a product
the FRIMARY SECTOR of industry extracts and uses the natural resources of the earth.
The SECONDARY SECTOR of industry manufactures goods using the raw materials provided by the primary sector.
The TERTIARY SECTOR of industry provides services to consumers and the other sectors of industry.
A FREE MARKET ECONOMY has no government control over factors of production. It is also known as a MARKET ECONOMY.
A COMMAND ECONOMY does not have a private sector as all resources are owned by the state.
PROFIT is the surplus after total costs have been subtracted from sales revenue.
A MERGER is when the owners of two businesses agree to join their firms together to make one business.
A TAKEOVER OF ACQUISITION is when one business buys out the ownes of another business which then becomes part of the ‘predator’ business fi.E. The firm which has aken it over).
HORIZONTAL INTEGRATION is when one firm merges with or takes over another one in the same industry at the same stage of production.
VERTICAL INTEGRATION IS when one firm merges with or takes over another one in the same industry but at a different stage of production. Vertical integration can be forward or backward.
A PARTNERSHIP AGREEMENT is the written and legal agreement beiween business partners. It is not essential for partners to have such an agreement but it is always recommended.
SHAREHOLDERS are the owners of a limited company. They buy shares which represent part ownership of a company.
bag: a soft container made out of paper or thinplastic, or a stronger container made of leather,plastic, or other material, usually with a handle, in which you carry personal things or clothes or other things that you need for travelling
bale: to tie up something tightly into bales:The hay must be baled, and stacked as quickly as possible
bundle: a combination of products, services, or pieces of equipment that are supplied together or sold as a group
barrel: a large, round container for storing liquids such as oil or wine
box: a square or rectangular container
carboy:a large container, sometimes in a frame for support, used for storing and transporting liquids
case : a container for storing or protecting something
carton: a box made from thick cardboard, used for storing or transporting goods
cask:a strong, round, wooden container used for storing liquid
chest:a large, strong box, usually made of wood, used for storing goods or possessions or for moving possessions from one place to another
crate:a box made of wood, plastic, or metal, especially one divided into parts to hold bottles
drum:the hollow metal cylinder in a washing machine into which clothes and other things are put for washing
sack:a large bag made of strong cloth, paper, or plastic, used to store large amounts of something
roll;to move somewhere by turning in a circular direction, or to make something move this way
tugs :A small boat with a very powerful engine, I tow a ship stranded in the harbor.
delay:The shipment from China has a delay of 20 days.
crane,a tall metal structure with a long horizontal part, used for lifting and moving heavy objects
demurrage:money that has to be paid when a chartered ship is used for longer than agreed, or when goods are collected later than the agreed time after being taken off a chartered ship
congestion,due to the bad weather in the port, there were congestions in the unloading of merchandise