This question is about the comparison between the partnerships and company. The question require us to determine whether which type of business structure is suitable for Mr. Azwan and Mr. Zuhri and advise them. In the end, we will be able to know about what the differences between partnerships and company are and why it is better to open up either one of these business structure.
A partnership consists of two or more members in order to form a partner relationship and they share their ownership in making a business. Partnership is easier to form and it is cheaper. The maximum number of partners that is needed to form partnership are twenty. Partnership exists on a business in common with a view of profit, liability, expenditure and responsibility (Kunz, 2015). Besides, the shares of a partner will not be able to transfer to another person without the agreement of the owner and thus, when one of the partners went into bankrupt, insanity, retire or death, the partnership will dissolves. The partners will entered into a contractual agreement only among themselves and not with the firm (Pushparaj, 2012).
In raising money, the partners have to invest in their funds in order for the business to operate. Partners will have difficulty in finding resources and funds as their personal resources and funds are limited (Anon., n.d.). So, if the partners have not enough funds, they are forced to borrow from other sources such as bank and lenders but they will usually imply a high interest on the money that is borrowed. Thus, the partners have to provide security for the loan which means that the borrowers have to mortgage something as a guarantee in order to get the money.
The partners are liable for their own acts, decisions and debts. Besides, the partners also have unlimited liabilities. The profits earned are separated equally among the partners or is distributed according to the ratio of their proportion (Kunz, 2015).
The property of the firm is under the joint name of partnerships. However, this type of arrangement may be problematic because the partners may contribute different amounts of funds into the company. It will also become a problem when a partner is bankrupt or dead. This is because partnership is not a separate entity, so the partners cannot own the property (Roach, 2012).
Company is owned by the shareholders and is an independent legal entity. Independent legal entity means that the shareholders make decision on who is in charge of operating the company.
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