Introduction to Business Law - Essay Example

On the death of a sole trader the business ceases. Thus if the sole trading option is taken then the investment of 20,000 can be apportioned in accordance with his own judgment and due to his achievement as a good student he can manage the business according to his own ways. The assets would also be owned by him; however, the responsibility of debts and obligations would be without any limit. (Taylor 2009). As far as a partnership is concerned, it is where individuals are in a business and share the assets and liabilities of the partnership, this can be done orally as well.

The legislation that governs a partnership is that of Partnership Act 1890. One of the main disadvantage of partnership is that there is unlimited liability of the debts of partnership jointly and severally which could lead to bankruptcy of partners if there is inability of payment of debts. Furthermore there can be failure to issue debentures or floating charges. Contribution to capital would therefore be from partners. The procedure is that when a partner leaves, the remaining partners would buyout his share.

When compared with a company there would be lesser formality (memorandum and articles; written agreement; roles of director), expense (registration) and publicity (publicly available accounts). Thus if partnership is used opinions on decision making can be obtained from other partners (there can be sleeping partners as well); assets ownership can be shared or individually owned; net profits can be shared; debts and obligations can be shared, however failure may result in him being personally accountable to the other partner’s share.

As far as a limited company is concerned the main advantage is that the liability is limited to the extent of the unpaid amount of the shares of each shareholder. Thus the shareholders and directors are protected to the extent that they were acting honestly. Furthermore, a company has