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1. Partnership vs. Limited
company
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2. Partnership
 Express or implied agreement by two or more
individuals to start a common business for making
profit
 All partners contribute capital, labor, skill or property
 Ways of contribution depend on agreement.
 Also share the profits and losses
 Firm must file information returns to report its
income, gains, losses, and deductions as a result of
operations yearly.
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3. Partnership
 No payment of annual income tax.
 Each partner required to include his/her share of
business income or loss in tax returns.
 Each partner sets aside sufficient money to pay taxes
on their share of annual profits.
 Implies partners must approximate the amount of tax
payable for the year and pay to the HM Revenue and
Customs.
 Partners pay taxes whether business makes profits or
not
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4. Partnership
 Relatively easy to set up and run
 As long as partners have a common understanding of
how to manage it.
 Each partner has his/her responsibilities as per the
agreement.
 Raising capital solely the duty of partners.
 General partnership: all partners have liability for their
actions, decisions, and business debts.
 Implies that their properties can be seized if business
defaults on debts.
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5. Partnership
 Limited partnership: liability of some partners is
limited.
 These are not liable to business debts.
 Limited Partnership Act 1907 mandates that even in a
limited partnership, one partner must have the full
liability for the business.
 Limited Liability Act 2000 limits the liabilities of all
partners
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6. Limited company
 Has special status in law
 Is incorporated – has own identity unique from
owners.
 Can sue or be sued or own property in own right
 Ownership categorized into equal parts, referred to as
shares.
 Owners cannot be held personally responsible for
debts.
 Owners’ property cannot be taken if business defaults
on debts.
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7. Limited company
 Owners need not to be involved in day-to-day running
of business.
 Owners can seek help from outsiders to raise capital.
 Company pays tax - a fixed percentage of profits made.
 Owners paid a salary by company, have obligation to
pay income tax
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