Theory question 101
Business UnitsCommerce 2 (essay)
Compare a partnership and a public limited company as business units under the following headings:
(a) formation;
(b) ownership;
(c) raising of capital;
(d) liability
(e) transfer of shares.
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(a) Formation: partnership – simple and cheap, by agreement or deed of 2–20 partners; PLC – registration with memorandum, articles and other documents, certificates of incorporation and trading; costly and slow.
(b) Ownership: partnership – owned and usually managed by the partners; PLC – owned by shareholders, managed by a board of directors (ownership separate from management).
(c) Raising of capital: partnership – partners' contributions and loans; PLC – sale of shares and debentures to the public.
(d) Liability: partnership – unlimited (except limited partners); PLC – limited to the shares held.
(e) Transfer of shares: partnership – a partner cannot transfer his share without the others' consent; PLC – shares freely transferable on the stock exchange.
Give both sides under each heading.