CAT / FIA FFA Syllabus A. The Context And Purpose Of Financial Reporting - Advantages and disadvantages of operating - Notes ^{4 / 6}

Limited Liability

More capital can be raised as no limit on number of shareholders

Control of company can not be lost to outsiders – shares only sold if all shareholders agree

The business will continue even if one of the owners dies, shares being transferred to another owner – separate legal identity

Profits have to be shared out amongst a potentially larger number of people

Detailed legal procedures must be followed to set up the business – consuming time and money

Financial statements have to comply with legal and accounting requirements

Financial information can be inspected by any member of the public once filed with the Registrar, including competitors

Personal satisfaction

Secrecy

Personal Control

Enjoyment of all profits

Absence of legal formalities when establishing business

Financial advantages in terms of low taxes, longer period to pay taxes and lower accountancy fees.

Limited sources of finance

Restricted growth

Full personal responsibility for the decisions and due to unlimited liability the debts of the business

There are no legal formalities to complete when setting up the business

Each partner can specialize

Partners can share the workload

Financial advantages in terms of low taxes, longer period to pay taxes and lower accountancy fees.

Partners are jointly and severely liable for the acts and omissions of the other partners

Profits have to be shared amongst more owners

Partners may disagree

The size of a partnership is limited to a maximum of 20 partners, however there are exceptions to this general rule

Any decision made by one partner on behalf of the company is legally binding on all other partners

Partnerships are unincorporated, resulting in unlimited liability for the partners, making them personally liable for the debts of the firm.