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Partnerships vs Companies

In: Business and Management

Submitted By timtamthai
Words 591
Pages 3
There are both multiple advantages and disadvantages associated with operating at certain levels of the business legal structure that can immensely impact the potential growth and decline of a business and as a result, decide its ultimate outcome. The current relationship between the three owners and state of the business; a partnership, provides benefits such as low operation costs, but on the contrary, involves unlimited personal liability. Conversely, the consideration of evolving into a company can also present benefits like limited liability, but also drawbacks including double taxation.

By maintaining their ongoing partnership, the three owners will continue to manage and the business will still function at a suitable financial level. Transitioning into a company will require a vast sum of money in order to be legally considered and operate as an official company. When upgrading a business to a company, the owners are required to lodge and submit an application with the Australian Security and Investment Commission (ASIC) and obtain a Certificate of incorporation. As well as this, they will have to apply for and receive an Australian Business Number (ABN) that becomes part of the company’s name, and pay a registration fee to the Australian Securities Commission (ASC). Avoiding the change into a company will prevent this need for securing additional expense, which includes the finances to sustain components and administration of the company once at a company level.

One of the negative features of a partnership is that all partners are jointly and severally liable for all debts and liabilities incurred by the business. Naturally, this means that each and every owner faces the very real prospect of becoming personally liable for a bad business decision made by any one of the other partners, regardless of whether or not everyone is aware of it. If the

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