A sole trading company is owned and headed by one individual only. The person and his business is "one" legally. One has to maintain a careful record if he is self-employed. You must be able to define personal transactions from business for proper tax computation. Such a person is legally liable for all the losses in the organization. If the business falters, his personal assets are liable to be liquidated. On the bright side, he has complete control over his business and does not have to share his profits with any body.
A partnership is a business run by two or more people together. A written agreement is necessary stating the terms and conditions of conducting the business without harming the interest of either party. Profits are shared either equally or as per the terms given in the written legal agreement. If profits are to be shared, so are the liabilities too. With the Limited Liability Partnerships Act, partners can profit from limited liability and reap tax advantages.
Unlike a sole trader or a partnership concern, the Limited Company is legally a separate entity. The directors and the shareholders have limited liability in the business. When such a company is created, it has an Authorized shareholding which defines the limit of the shareholder liability. This is the most viable options if the capital is being invested into the business by anyone who does not wish to be involved in running it.
Under the Companies Act of 1985, only limited companies need to be registered in the UK with Companies House. If you are a sole-trader or a partnership concern, you do not need to register but you should notify the Inland Revenue (IR) and National Insurance Contributions (NIC) Agency about the change in employment status, if you are switching from a regular job to a business.
The sole proprietorship means the business unit ownership & management is under control of one person. The sole trader is also called sole proprietorship or one man business. In sole trader the owner is not only the owner the all capital but also take all profit or loss responsibility. In sole trader the owner has unlimited liability. In law, the sole trader & the business are considered as one. In sole proprietorship no legal formalities are requires for formation & dissolve of business.
The partnership is the relationship between two to fifty persons who agree to run a common business with the view to earn the profit. The partnership act 1932 of Pakistan clearly mention that in banking business the partner must be between 2 to 10 & in limited partnership the no of member are 2 to 50 are required. All partner share profit & loss according to the partnership agreement. For forming the partnership requires the partnership deed on which all partner must signature agree upon it.
A company which is formed and registered under the companies ordinance 1948 of Pakistan is know as a registered company. The companies' ordinance provides registration of the following two types of companies.
• Company limited by shares
• Company limited by guarantee.
In company limited by shares is the most important and popular among the registed companies. It is a company which keeps the liability of its members limited up to the value of the shares purchased by them. It's further divided into private company & public company.
In company limited by guarantee is the company in which the liability of its members is limited up to the amounts guarantee by each members at the time of winding up to company. This type of company is form mostly when work is of non profit making nature. They are further divided into two types in which one is share capital while other is not share capital.
All of the above three type of business according to the company ordinance of 1938 of Pakistan the limited company need the license for running the business.
Describe the partnership company.
Distinguish between the record of a sole proprietorship,partnership and limited liability company on one hand and that of non trading organisation
Sole trader is owned by single owner who is responsible to get all loss and profit of business with limited liability. While in partnership, two or more partners share profit or loss of business with liability limited up to their investment. In case of limited company, Board of Directors is owners and they share equal resources and liabilities.