Business Formation
When more than one people decide to form a business, several important considerations have to be made. One of them is which organization form to take. So as to make the favorable choice, the cons and pros of each choice must be put into consideration. Additionally, the state of affairs, financing options, business laws and the magnitude of the risk involved must be well thought about. This paper discusses the advantages and disadvantages of corporations and partnerships as well as equity and debt financing and how choosing any of them would affect a business’s future. For the trainers Donna Rinaldi, Rich Evans, and Tammy Booth to make a decision, they have to consider the following advantages of a partnership. To start …show more content…
Firstly, they would suffer from unlimited liability since the partners are held legally responsible for the business debts and legal duties. This means that the partners’ properties may be apprehended to pay creditors. Secondly, disagreement between partners in decision making or management could bring the business down and could also sour the relationship between the partners. In case of disagreements among the partners, the partnership cannot be sold as a whole to a third party without interfering with its sustained functioning. Thirdly, since the profits and losses are shared equally in a partnership, a partner who is contributing more may not reap the benefits of extra input .in the same line, the continuity of partnership is threatened by the death of the partners (Empson and Chapman …show more content…
Since the corporation is considered as a separate legal entity from its owners, the shareholders would not be held liable for the business debts or legal business requirements. Moreover, the continuity of the business would be assured even after the death of the shareholders. In the same line, a corporation is in a better position when it comes to raising capital for the business. This can be achieved by selling stock shares and creating more effective stocks. Additionally, due to its independent entity the ownership of a corporation can be easily transferred without interfering with its running (Balotti and Finkelstein 2008). Nevertheless, the following shortcomings are connected to a corporation. Firstly, the starting capital for a corporation is high. Besides, starting the corporation could consume more time due to the many legal formalities which are involved in the process. A corporation also requires extensive documentations to be submitted annually to the government. This compels them to follow a restricted form of management as it is defined in its charter. Moreover, the corporate would have to pay government tax as an independent entity (Penman and Stephen
When more than one people decide to form a business, several important considerations have to be made. One of them is which organization form to take. So as to make the favorable choice, the cons and pros of each choice must be put into consideration. Additionally, the state of affairs, financing options, business laws and the magnitude of the risk involved must be well thought about. This paper discusses the advantages and disadvantages of corporations and partnerships as well as equity and debt financing and how choosing any of them would affect a business’s future. For the trainers Donna Rinaldi, Rich Evans, and Tammy Booth to make a decision, they have to consider the following advantages of a partnership. To start …show more content…
Firstly, they would suffer from unlimited liability since the partners are held legally responsible for the business debts and legal duties. This means that the partners’ properties may be apprehended to pay creditors. Secondly, disagreement between partners in decision making or management could bring the business down and could also sour the relationship between the partners. In case of disagreements among the partners, the partnership cannot be sold as a whole to a third party without interfering with its sustained functioning. Thirdly, since the profits and losses are shared equally in a partnership, a partner who is contributing more may not reap the benefits of extra input .in the same line, the continuity of partnership is threatened by the death of the partners (Empson and Chapman …show more content…
Since the corporation is considered as a separate legal entity from its owners, the shareholders would not be held liable for the business debts or legal business requirements. Moreover, the continuity of the business would be assured even after the death of the shareholders. In the same line, a corporation is in a better position when it comes to raising capital for the business. This can be achieved by selling stock shares and creating more effective stocks. Additionally, due to its independent entity the ownership of a corporation can be easily transferred without interfering with its running (Balotti and Finkelstein 2008). Nevertheless, the following shortcomings are connected to a corporation. Firstly, the starting capital for a corporation is high. Besides, starting the corporation could consume more time due to the many legal formalities which are involved in the process. A corporation also requires extensive documentations to be submitted annually to the government. This compels them to follow a restricted form of management as it is defined in its charter. Moreover, the corporate would have to pay government tax as an independent entity (Penman and Stephen