Law - Corporate Law - Essay Example

The partners wish to bring in more funding into the proposed entity. Consequently, they want the resources injected be recognized as capital. Additionally, they want the business to bear responsibility for any debt pertaining to it. Considering the conditions set by the three partners Tinky, Lola and Daphne the best form of business is a Private limited company (PLC). This form of an organization is better than a sole proprietorship. The proposed business form has a distinct identity from its founders.

As such, they would bear no liability for the entity’s transactions2. Additionally, such an entity can own property and take legal action against another party. The proposed business form will incur less tax than a sole proprietorship3. The law treats the incomes of a sole proprietorship as those of the founders of the organization. A private limited company (PLC) fits the description of the business form they are seeking. A PLC is accountable for its own tax burden. This asserts that the organization is a legal personality contrary to a sole proprietorship4.

Individuals that subscribe for shares in a PLC are the owners since a share denotes the basic unit of ownership in any a PLC5. Shareholders do not administer the company openly. Nonetheless, they appoint directors who run the entity6. This allows a PLC to inject professionalism in its management since they appoint qualified individuals into such posts. Conversely, the sole proprietor governs his entity based on his knowledge. Therefore, the business may suffer due to his incompetence7. Nonetheless, decision-making is easier since no consultation are held.

Overall, a PLC is a better business form than a sole proprietor based on the above reasons. The company act governs all the undertakings of all incorporated bodies. The act provides stringent statues on the way that a PLC should undertake its activities8. Conversely, they are negligible rules that direct the operations of a sole proprietorship. The directors in a PLC are answerable to the members while the sole proprietor is liable to himself9. A limited liability partnership (LLP) is a very attractive form since Tinky, Lola and Daphne are already in such similar business.

Thus, a LLP will only limit their liability, but the entity will continue to incur relatively enormous taxes since the tax authorities charge it alongside the other incomes of the partners10. This implies that a LLP has no legal personality. A LLP is better that ordinary partnership since the members’ liability is limited. This denotes its major variation from other partnerships. However, it is imperative to note that the accountability of members in such an entity may vary. As such, some partners might have restricted liability11.

In such a scenario, the partners with unlimited responsibility would meet the partnership’s debt during liquidation12. Nonetheless, in a PLC no member takes responsibility for the entity’s loans since the organization is separate from its founders and its members. The three partners should consider this pro13. Partners may run the business simultaneously by sharing duties. Alternatively, they may appoint one of the members to govern the organization. Governing such an entity is tricky since decision-making requires consultation.

This makes decision-making challenging14. The partners share