When choosing the legal structure for a business it is
one of the most important decisions that will make in the startup process. The
above situation is about a startup business which is going to start with two
people. So they can use either partnerships or limited company structures. But
have to consider its strengths and weaknesses before choosing the particular
A partnership exists
where persons carry on business together with the common objective of making a
Ernst & Young, Don & Sons etc.
Limited company is a
type of business structure which is completely separate from its owners. It can
enter into contracts in its own name and is responsible for its own
actions, finances and liabilities.
A partnership business forms
automatically when two or more individuals decide to go into business together.
Partnerships are not required file documents with the state to begin the
business. Conversely, LCs are required to file articles of organization, known
as a ‘certificate of formation’ with the state where the business is organized.
And it must register in each state where the LC conducts business. Every state
charges a fee to file articles of organization, which partnership businesses
will not have to pay.
In a partnership
business, the partners of the company have unlimited liability for business.
This means that if the partnership gets sued, partners could lose their assets if
the business assets are not enough to cover the debt. Owners of an LC have
limited liability against lawsuits and other business-related liabilities which
does not extend beyond the amount invested in the company.
of a partnership are responsible for managing the day-to-day operation of the
company. If all
partners agree, the nature of the business, the sharing of profits, the
administration of the partnership can all be changed within a short period. But
in limited companies there are separate procedures to made decisions.
In partnerships financial resources
can be expanded by adding more partners. Partnerships can be owned 2 members to
20 members. This means that the more partners there are, the
more money they can put into the business, which will allow better flexibility
and more potential for growth.
Once your limited
company is incorporated, you will need to register for corporation tax.
This need to be done within three months, or you might have to pay a fine.
Partnerships are refers to as pass-through
the business doesn’t pay income tax on its profits.
According to the
Fernando and Perera, it is ideal to have a partnership
rather than a limited company.Becuase there are only two members who are just
going to start up the business. Partnership is easy to establish immediately
than a limited company. Partnerships are not required file documents with the
state to begin the business. They are less strictly regulated than limited companies,
in terms of the laws governing the formation because the partners have the only
say in the way the business is run they are far more flexible in terms of
management, as long as all the partners can agree.
And also no need to pay
taxes from the profits in a partnership.as Fernando and Perera is new to the
business and they may not be earn more
profits from the business till they established.
So according to my
perception I think it is better to have a partnership agreement between
Fernando and perera in this initial stage of the business. But when they
expanded they can change their ownership structure to limited companies where
there is distinct legal personality which help to limited the liability of the
1. Financial accounting
has its focus on the financial statements which used to present the financial
health of an organization. It is produced to its external stakeholders such as
board of directors, stockholders, financial institutions and other investors.
Management or managerial accounting is used by managers to make decisions
concerning the day-to-day operations of a business. It is focused on providing
information within the company.
2. Financial accounting
presents a specific period of time in the past and shows how the company has
performed. Financial accounting reports must be filed on an annual basis.But
managerial accounting is based on current and future trends, which does not
allow for exact numbers. And it relies heavily on forecasting of markets and
3. Financial accounting
is precise and must adhere to Generally Accepted Accounting Principles (GAAP).It
requires records which is needed to prove that the financial statements are
correct. But management accounting is
often more of a guess or estimate, since most managers do not have time for
exact numbers when a decision needs to be made. So managerial accounting frequently deals with
estimates, rather than proven and verifiable facts.