Dear Mr Hung,
Three days ago, you and your wife approached Legal Solutions LLP to enquire about several issues. I am writing this letter to you, on behalf of Legal Solutions LLP, to respond to your queries.
Firstly, regarding whether your restaurant should be set up as a limited liability partnership or a private company limited by shares:
Limited Liability Partnership vs. Private Company Limited by Shares
In deciding on whether to set up a limited liability partnership or a private limited company, it is important to know how they compare to each other.
Similarities between Limited Liability Partnerships and Private Limited Companies
There are several similarities between limited liability partnerships and private limited companies.
Firstly, both organisations are separate legal entities from their owners. This means that they have a perpetual succession (i.e. they do not dissolve if their members or partners die), they can own property in their own name and can sue and be sued. (EnterpriseOne, 2012)
Secondly, both organisations have limited liability. As such, directors, members or partners of the organisations are not personally liable for the debts or losses of the company beyond their original investment. This excludes cases in which losses were incurred due to a partner’s or director’s lack of due diligence. (EnterpriseOne, 2012)
Benefits of a Limited Liability Partnership over a Private Limited Company
The first benefit of a limited liability partnership over a private limited company is the ability to withdraw profit from the company with ease. In a limited liability partnership, one can withdraw capital from the business easily, assuming that the partnership agreement does not state otherwise, however, in a private...
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...tion 157 of the Companies Act, Ong shall be liable to the company for any profit made by him or any damages suffered by the company. As such, Ong was ordered to pay for the profits he made and the losses suffered by the plaintiff with interest due thereon at the rate of 6% per annum and the cost. Moreover, since he also failed to comply with provisions under Section 156, he was to be fined up to $5000.
In conclusion, it is important for directors to always disclose their conflict of interests and obtain proper consent from the board of directors and shareholders before entering into a contract or carrying out a transaction on behalf of the company. It is also important for directors to always act in good faith and in the best interest of the company. This is the key to avoiding a potential breach of fiduciary duties.
(Singapore Law Academy, 2005) (Lawnet, 2004)
Partnership – “A legal entity formed by two or more co-owners to operate a business for profit.” (Longenecker, Petty, Palich, Hoy, Pg. 202) In a partnership, the advantage for the owners is the capability to reduce the workload and the financial burden, especially if each partner has management skills that enhances the business. The disadvantages of a partnership such as personal conflicts and leadership expectations, therefore this organizational form should only be chosen once all other options have been considered.
Based on the facts in case study three, a limited liability company, LLC is the recommended business entity for Arcadia Sports. The justification for this choice is that Jeb has the resources to start the business and Josh has the expertise to run the day to day operations. Jeb has no desire to be involved in the day to day operations of Arcadia Sports. Also, the two have decided to split the profits. Forming a LLC will protect Jeb from any liabilities that arise during the operating of Arcadia Sports and allow him to enjoy equal profits. Members of a LLC are not personally liable to third parties for debts, obligations and liabilities beyond their capital contribution (Cheeseman, 2015).
Below I have set out a table to show the Advantages and Disadvantages of a public limited company. ADVANTAGES DISADVANTAGES Shares offered for sale on the stock exchange, so that large amounts of capital can be generated. Shareholders protected by limited liabilit... ... middle of paper ... ...ibit the already efficient practices from continuing.
Conflict of interest Our company is committed to maintaining a high standard of integrity with all our dealings with potential, current
Besides, section 216 of Insolvency Act 1986 restricts a director of re-using the old company’s name. Directors are prohibited from incorporating or involved in setting up a new company with the same or similar name as the old company for a period of 5 years from liquidation. This section imposes personal liability on the directors. If a person breach of this section is liable to imprisonment or a fine, or both . In order to convince its customers and creditors the company is the same entity, the directors of the original company may often change the new company name only very slightly. Thus, the scope of this section has been widened by the UK courts, applying it where the same business is conducted by the same entity and even if only one word...
And there are some advantages of a public limited company such as there is limited liability for the shareholders which mean the maximum losses that will cause are the amount that the shareholders invested in that company it won’t cause more than that so for the investor the risk is limited. Other than that the public limited company’s potential capital that they can raised is large they can raise fund by selling shares or borrow from bank. Also public limited company is easier to obtain financing because most of the banks and financial institution would like to invest to the larger company just like PLC. PLC have high continuity although the helm of company step down the company can still operating normally because shareholder can transfer their shares to anyone. There are many advantages of PLC but it still have some disadvantages for instance :PLC must make public annual financial report of the company also if the company close the liquidator must be realize the all assets to distribute to all creditors and shareholders. So the owner of Tesco are those people who bought the shares of Tesco. Furthermore, every year Tesco will held the annual general shareholders meeting. Tesco will report the annual accounts, strategic report and directors' report etc. to the shareholders in the meeting. Therefore the shareholders of Tesco can have more information and data to grasp more about
Business is a game of gambling. In poker, a person can be honest and keep his or her hands above the table, but there is always a person that has hands under the table. Businesses find many people with hands under the table when the issue of corporate self- dealing appears. Corporate self-dealing is when a trustee or other fiduciary of a business takes advantage of his or her position in a transaction for self-benefit instead of the company’s overall benefit. Self-dealing can include corporate assets or opportunities. John H. Farrar and Susan Watson notes, “If a director deals with a company that he or she is a director, there is a risk of conflict of interest as well as a breach of the duty to act bona fid for the good of the company or promote success” (495). Without some form of limitations businesses have no way to control the act of self-dealing within the company. Although numerous solutions have been suggested, the solution implemented needs to be able to form to each individual business without limiting the transactions of the business. Nonintervention, Prohibition, and Majority of the Minority Vote have all been considered, however, these solutions are not efficient enough for the business world or able to best limit the role of self-dealing. Nonintervention only ignores the problem in hopes it can resolve itself, while Prohibition provides only a strict method that does not ensure that people will not perform the actions. The Majority of the Minority vote resembles a voting system, but is not time efficient. While it only guarantees that the transaction is fair, the best solution to limit corporate self-dealing is to incorporate the Fairness test into business transactions.
The corporate directors have a fiduciary duty of trust and confidence to its appointed leaders. Roger, as the director, was liable for his decisions, but is not liable because of unknown circumstances. The major oil supply disruption was out of his control. Directors are chosen to lead success of an
As a consequence of the separate legal entity and limited liability doctrines within the UK’s unitary based system, company law had to develop responses to the ‘agency costs’ that arose. The central response is directors’ duties; these are owed by the directors to the company and operate as a counterbalance to the vast scope of powers given to the board. The benefit of the unitary board system is reflected in the efficiency gains it brings, however the disadvantage is clear, the directors may act to further their own interests to the detriment of the company. It is evident within executive remuneration that directors are placed in a stark conflict of interest position in that they may disproportionately reward themselves. The counterbalance to this concern is S175 Companies Act 2006 (CA 2006) this acts to prevent certain conflicts arising and punishes directors who find themselves in this position. Furthermore, there are specific provisions within the CA 2006 that empower third parties such as shareholders to influence directors’ remuneration.
Before a partnership formation is imminent, the business needs to decide on which type of partnership to form. There are three types of partnerships: (1) general partnerships, (2) limited partnerships, and (3) joint ventures. All three partnerships contain two or more owners, but all partners assume equal division of ownership, liabilities, and profits in a general partnership. Limited partnerships offer limited liability protection based on each partner’s contribution percentage. Joint ventures are classified as general partnerships with limited existence periods. Once a type of partnership has been determined, the business fulfills a series of requirements before the partnership can be successfully formed. The first step is to register
According to Corporation Act 2001 s124(1), it illustrates that ‘’A company has the legal capacity and powers of an individual both in and outside the jurisdiction” . As it were, company as a legal individual must be freely with all its capital contribution shall embrace liability for its legal actions and obligations of the company’s shareholders is limited to its investment to the company. This ‘separate legal entity’ principle was established in the case of Salomon v Salomon & Co Ltd [1987] as company was held to have conducted the business as a legal person and separate from its members. It demonstrated that the debt of company is belonged to the company but not to the shareholders. Shareholders have only right to participate in managing but not in sharing the company property. Besides ,the Macaura v Northern Assurance Co Ltd [1925] demonstrates that the distinction between the shareholders and company assets. It means that even Mr Macaura owned almost all the shares in the company, he had no insurable interest in the company’s asset. The other recent case is the Lee v Lee’s Air Farming Ltd [1961] which illustrates that the distinct legal entities between employee ad director allows Mr.Lee function in dual capacities. It resulted that the corporation can contract with the controlling member of the corporation.
A registered company, as an artificial person is separate from its members and exists only by virtue of the Companies Act under which it is incorporated. When a business is incorporated, it becomes a separate legal entity and, therefore, can be sued and sue without affecting the shareholders personal assets. This was established in “Salomon v A Salomon Co.Ltd”. Separate legal personality is known as the veil of Incorporation. This protects the shareholder and places the responsibility of the company onto the directors. These duties are outlined in the Companies act 2014.
...s of a partnership are the shared profit factor, which can cause a lot of animosity among the partners if things do not go as well or if there is an unequal amount of contribution among the partners. Additionally, there is both individual and joint liability with partnerships. This can often cause dissention between the partners (“SBA”). Essentially, the sole proprietorship is the best choice because the risks are minimal because it is solely one individual, who can make the best choices and decisions and deal with the consequences that arise accordingly.
The Role of the Directors in a Company is of a paramount importance in the discourse of the proper running of the company. Directors are the spirit of the company .The company is merely a legal entity, governed by its directors. These directors have certain duties and responsibilities. These are mainly governed by the Corporation Act, 2001. Section 198A (1) of The Corporations Act, 2001(The Corporations Act 2001 s 198A (1)), clearly states that, ‘The business of a company is to be managed by or under the direction of the directors’.
The owner has the ability to grow or contact its operation at will with no need to consult with a boss or board of directors