Different Types of Partnership

Partnership business means any kind of business which is owned by two or more people who are agreed to share all the gains losses profits and benefits, this kind of company is called as a partnership. In this partnership the laws don’t share between the owners and their business. Company Partners should have a legal agreement which including how the company decisions will be made, how the profits will share among partners, when they facing a problem there should be a agreement which including how the problems will be resolved, and how the future partners will be added into the partnership, how partners can be kicked out, or what actions will be taken to close the partnership when needed. They also must have an agreement that how much capital and time each will contribute to the company by each partner. When there are losses and profits both are should be divided by an agreed percentage by the partners.

Partnership company can be started by shake hand or oral or written. But, for every each partner’s protection, but the most suitable way is to have a written or printed partnership agreement that including all the necessary agreements. This written or printed agreement should include the percentage of dividing profits and losses, and what are the rights of each partner, what are the responsibilities of each partner, and what happens if a partner leaves from the business or what happens when a partner newly joined to the business and amount of capital that each partner is investing to the business, and how the assets and capital should be divided among partners if the business is closed. All the things are changing at every second, so it is good that having signed document that including all of these things.

Advantages of business partnership

• Capital – If there are more number of partners they can invest more capital to the business.
• Flexible – Partnership businesses are easier to form and easier to run. Owners can decide the way that how the business should run.
• Easy to make Decisions – Partners can easily take decisions according to the situation of the business.
• Limited external regulations - When compared to the other types of businesses partnerships has less regulations.
• Responsibility is shared – Partners can share the responsibilities among them. It will allow to partners to make their abilities better.

Disadvantages of business partnerships

• Disagreements – There can be disagreements between partners. It will be adisadvantage when making decisions.
• Unlimited liability – Partners are subjects to unlimited liability which means each partners shares liability and all the risks including financial risks of the business.
• Taxation – This is one of a major disadvantage of partnerships. Partners must pay tax each year.
• Profits should be shared – All the earned profits should equally share among partners.

Limited Companies

Limited company is an one of a legal business company type. In these limited companies the control of the companies and the ownership of the companies are in the hands of different kind of people. The owners of these limited companies are called as shareholders and members of the company. Simply the liability is limited to this type of companies. Limited companies allow their entrepreneurs to keep finances and assets separate from the business. This means the shareholders who have invested money to the company are only responsible for the money which they have invested to the business. They are no more responsible than they invested. This is good way to do investment without risk to the personal wealth. These kinds of companies should be registered at registrar of companies due to the law of Sri Lanka.

Advantages of limited companies

• Limited liability for shareholders – As earlier mentioned the shareholders are liable only for their invested money.
• Tax advantage and tax – These limited companies are only taxed on their profits.
• Great Security – The limited Companies are totally separate from the directors and shareholders. Because of that their personal assets are not at any risk.
• Respect – Setting up a “Limited “company it gives the directors an air of respect.
• Pensions – Limited companies can fund their employees a legitimate expense.

Disadvantages of limited companies

• Cost is high – Limited companies are expensive to establish.
• Financial status are public – Company accounts and records are can be accessed by any person