Choosing will have the following strengths. · The income

Choosing the type of business ownership is a very important
aspect of starting a business as it determines various legal and operational
issues that affect a business. There are many types of business ownerships that
can be established when starting the restaurant business. The most suitable
kind of ownership for this will be either a partnership or a limited company.
Both have their strengths and weaknesses, which I have stated below.

A partnership is where the ownership of the business is
shared among two or more individuals. A partnership will have the following
strengths.

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·        
The
income earned by the business will directly go to the partners.

The partners will be able to divide
the entire profits among themselves as they do not have to pay taxes in the
name of the partnership. This avoids the double taxation issue, where a
business will be taxed and then the owners will again be taxed on the profits
received by them.

 

·        
Less
legal liabilities.

There aren’t many legal requirements
to be fulfilled when starting a partnership. It is not even compulsory to have
a partnership agreement, although it is better to have one.

 

·        
There
doesn’t have to be any particular governing structure.

The partners themselves can decide
how they want to govern the business. They can choose a centralized structure
or a completely decentralized structure which allows all the partners to
actively participate in management.

 

·        
Simplicity
and flexibility

Less expensive to form and require
less formalities and paperwork. Business decisions can be taken by discussions
among the partners itself.

 

 

The weaknesses of a partnership can be stated as follows.

·        
Unlimited
liability

Partners are personally liable for
business debts and liabilities. If the business goes bankrupt, the partners
will have to somehow pay off any remaining debt and liabilities using their
personal properties. Each partner is also liable for debts incurred by the
actions of another partner.

 

·        
Instability

There can be instances where a
partnership may not be that stable as one partner’s actions itself can lead to
the partnership being dissolved. Death, bankruptcy or resignation of a partner
my lead to the business being unexpectedly dissolved.

 

When it comes to a limited company the advantages that can be
gained are as follows.

·        
Status

The term ‘limited’ gives the company
more esteem and makes the company seem bigger, which will help to attract more
investors and customers. Also, suppliers and other businesses are more willing
to deal with a limited company because of the professional image.

 

·        
Liability
is limited

In a limited company, the
shareholders cannot be held personally liable for the company’s debts and liabilities.
The financial liability of each shareholder for the company’s debts is limited
to the value of his/her initial investment.

 

·        
Lower
taxation levels

Limited companies are subjected to
lower tax levels than the personal tax rates placed on partnerships.

 

·        
Survival

As the limited company is considered
as a separate legal entity, it will survive beyond the existence of its
original owner.

 

However, a limited company has the following disadvantages.

·        
Accountancy
and reporting

A limited company is required to
submit more accounting information than a partnership. They will have to be
more concerned about accountancy because of this.

 

·        
Legal
obligations

A limited company has more legal
obligations than a partnership. They are required to go through more legal
procedures and submit more legal documents.

 

·        
Cost
of establishment is high

Establishing a limited company can be
costly as there are a lot of requirements to be fulfilled.

 

After considering the above pros and cons of both
partnerships and limited companies, my recommendation would be that unless you
have sufficient capital and necessary resources and are prepared to face the
risk and responsibility of starting a limited company, it is better to go for a
partnership initially. After developing it step by step you can upgrade it to a
limited company when you have earned enough capital, resources and experience.Choosing the type of business ownership is a very important
aspect of starting a business as it determines various legal and operational
issues that affect a business. There are many types of business ownerships that
can be established when starting the restaurant business. The most suitable
kind of ownership for this will be either a partnership or a limited company.
Both have their strengths and weaknesses, which I have stated below.

A partnership is where the ownership of the business is
shared among two or more individuals. A partnership will have the following
strengths.

·        
The
income earned by the business will directly go to the partners.

The partners will be able to divide
the entire profits among themselves as they do not have to pay taxes in the
name of the partnership. This avoids the double taxation issue, where a
business will be taxed and then the owners will again be taxed on the profits
received by them.

 

·        
Less
legal liabilities.

There aren’t many legal requirements
to be fulfilled when starting a partnership. It is not even compulsory to have
a partnership agreement, although it is better to have one.

 

·        
There
doesn’t have to be any particular governing structure.

The partners themselves can decide
how they want to govern the business. They can choose a centralized structure
or a completely decentralized structure which allows all the partners to
actively participate in management.

 

·        
Simplicity
and flexibility

Less expensive to form and require
less formalities and paperwork. Business decisions can be taken by discussions
among the partners itself.

 

 

The weaknesses of a partnership can be stated as follows.

·        
Unlimited
liability

Partners are personally liable for
business debts and liabilities. If the business goes bankrupt, the partners
will have to somehow pay off any remaining debt and liabilities using their
personal properties. Each partner is also liable for debts incurred by the
actions of another partner.

 

·        
Instability

There can be instances where a
partnership may not be that stable as one partner’s actions itself can lead to
the partnership being dissolved. Death, bankruptcy or resignation of a partner
my lead to the business being unexpectedly dissolved.

 

When it comes to a limited company the advantages that can be
gained are as follows.

·        
Status

The term ‘limited’ gives the company
more esteem and makes the company seem bigger, which will help to attract more
investors and customers. Also, suppliers and other businesses are more willing
to deal with a limited company because of the professional image.

 

·        
Liability
is limited

In a limited company, the
shareholders cannot be held personally liable for the company’s debts and liabilities.
The financial liability of each shareholder for the company’s debts is limited
to the value of his/her initial investment.

 

·        
Lower
taxation levels

Limited companies are subjected to
lower tax levels than the personal tax rates placed on partnerships.

 

·        
Survival

As the limited company is considered
as a separate legal entity, it will survive beyond the existence of its
original owner.

 

However, a limited company has the following disadvantages.

·        
Accountancy
and reporting

A limited company is required to
submit more accounting information than a partnership. They will have to be
more concerned about accountancy because of this.

 

·        
Legal
obligations

A limited company has more legal
obligations than a partnership. They are required to go through more legal
procedures and submit more legal documents.

 

·        
Cost
of establishment is high

Establishing a limited company can be
costly as there are a lot of requirements to be fulfilled.

 

After considering the above pros and cons of both
partnerships and limited companies, my recommendation would be that unless you
have sufficient capital and necessary resources and are prepared to face the
risk and responsibility of starting a limited company, it is better to go for a
partnership initially. After developing it step by step you can upgrade it to a
limited company when you have earned enough capital, resources and experience.