Introduction to Business Law - Report Example

Introduction to Business Law Introduction According to economic surveys, a person’s life expenses increase by ten per cent every year with considerably marginal growth in his/her annual income. Therefore, business is the most possible method to procure unlimited income and thereby to meet the mounting expenses. The following presentation illustrates relevant aspects of commencing a business with specific focus on the pros and corns of Sole Trading, Partnership, and Company Operations. Sole Trading When a person individually initiates and operates his/her own business, it is called soletrading. It generally involves lower amount toward capital investment as compared to other modes of business ventures. It is best fitted to people with innovative business ideas and sufficient capital for running their business. The main benefit of this system is that the businessman owns everything what he acquires from the business. Moreover, with the feasibility of self guidance, the individual can grow beyond the horizons of any market without restrictions. In addition to this, as Tonkin (2006) states, sole trader can start the business with minimum set up cost and can continue operations without a tax file number. He is also exempted from many other legal charges and superannuation. On the other hand, sole trader is not free from risks as he is the only person responsible for any loss incurred in the business. A series of legal obligations may also drag him out of the line; sometimes he needs to pay provisional taxes and his annual tax returns may become more complicated. A positive spell of possible success is found in the discussion. As the aspirant here is good at his studies and has completed higher university education, he may have creative concepts. Although he is inventive and efficient, his vision is to target wealthy clients. In order to achieve wealthy customers, it is necessary to deal with luxury products for which his initial capital investment of ₤20,000 may not be adequate. Moreover, as he is a fresher in the business field he might fail due to his inexperienced business conduct. Partnership When two or more persons join together with their capital and make contract to run a lawful business, it is called partnership business. This system ensures collective responsibility for all liabilities arising on the ground of the partnership business. As it is in the case of sole trader, registration of partnership is not necessary. This feature helps the partners in minimizing the struggles of legal formalities. All the strategies of partnership firms are formulated on shared opinion of partners which would make the policies rather balanced in their nature. Partnership provides integrated knowledge of all partners by estimating the implications of pros and cons of each proposed program. Since it is a combined form of business, pooling of financial resources is easier task than in the case of sole trader. The most attractive benefit of partnership is that it guarantees division of risks among the partners as far as possible based on the strength of partnership deed. In addition to this, the secret nature of books of accounts is another advantage of partnership firms. At the same time, unlimited liability of partners might weaken the scope of partnership with a possible impact of negative social image. As finds in Singla (2009, p. 42), in case of lack of coordination in the opinions of partners, it would lead to lack of harmony and thereby inefficient business performance. Likewise, the existence of the partnership firms is uncertain as the partners have the right to terminate partnership at any time after giving a prior notice (Singla 2009, p.42). However efficient and skillful approach intensifies the scope of partnership. So, it is suggestible for the person to find one or two other individuals with same interests as that of him in order to form partnership business. By doing so, he can share his ideologies and innovative notions with his partners and put this into practice with their sanction. Company A company is formed when some persons organize themselves together to form a business venture and thereby to earn profit. Under this system, many persons jointly invest their capital for the formation of company; hence it is also called Joint Stock Company. Unike the case of partnership firm, shareholders private properties cannot be sequestrated in order to realize their business liabilities (Schneeman 2009, p.202). Since a shareholder can transfer his shares whenever he needs, this facility provides more liquidity to his savings. Similarly, a company is more stable than a sole trader or partnership firm since the shareholder’s death, insanity, bankruptcy or termination does not affect the operation of the company. Corporate accumulation of sufficient capital and efficient managerial capabilities facilitate the scope of company’s further expansion. A shareholder has no further liability if he has paid full amount on his shares. Since a Joint Stock Company is a financial conglomeration of people from multiple spectrums and the ownership identification is marked by the possession of a Share Certificate, more complex registration process and other legal formalities are inevitable in its formation. The elected shareholders (directors) are only the authorized persons to have direct access into the operations of the company with little participation of shareholders. Similarly excessive government control also hinders the smooth running of the company at times. Even as it is the most appropriate risk free method to start a business, the specified person may not get the opportunity to implement his concepts if he invests in a company. Separate Legal Personality Separate legal personality or separate legal entity is an attractive characteristic of a company. Since the company is an artificial legal person, it has all the legal rights and obligations of an individual person. So, the company can acquire various assets such as land and building or plant and machinery on its name; it can also open accounts or enter into agreements with the power of its legal personality. The identity of the company as a legal person provides it with a benefit that it can file a suit against anybody and can be sued by anybody. The acts or personal liabilities of members do not affect the constitution of the organization with any possible threat of bankruptcy. Similarly the shareholders’ liabilities are limited and they are escaped from the sequestration of their personal assets for the business liabilities since the company is a separate legal entity. As a result of this special feature, business and business persons are separated in the point of view with guaranteed scope for amplifying the growth of the company. Being a separate legal entity, the company ensures safety of investments and attracts more investors and shareholders to the business. Similarly, the company is feasible of taking individual and unbiased decisions which add values to shareholders. The company, while being considered a legal person, it requires to maintain a signature, which is a common seal which engages it in business line and promote its identity and reliability among public. The incorporate fund management system in the company allows little chance of manipulation as the BoDs and higher officials have no authority to operate financial accounts in any form. The legal identity of the company and its separation from the personal indices of its share holders relaxes the burden of investors by keeping them unanswerable to the Company’s Act or any provisions of the law. References Tonkin, C 2006, The Australian Consultant’s Guide II: Setting up and running your own consulting business profitably and painlessly, Aragon Gray Pty Ltd, Australia. Singla, RK 2009, Business Organizations, V.K Enterprises, New Delhi. Schneeman, 2009, Law of Corporations and Other business Organizations, Edition-5, Cengage Learning, USA. Read More