Theory question 101
Business UnitsCommerce 2 (essay)
Compare a public limited company with partnership under the following headings:
(a) Formation;
(b) Ownership and Control;
(c) Source of Capital;
(d) Liability;
(e) Dissolution.
Show the model answer
(a) Formation: PLC – registered with the Registrar (CAC) by filing memorandum and articles, gets certificates of incorporation and trading; partnership – formed by agreement (oral, written or deed) of 2–20 partners, may only register the business name.
(b) Ownership and control: PLC – owned by shareholders (minimum 7/2, no maximum), controlled by an elected board of directors; partnership – owned by 2–20 partners, managed by the (active) partners themselves.
(c) Source of capital: PLC – sale of shares and debentures to the public, retained profits, loans; partnership – partners' contributions, loans, ploughed-back profits.
(d) Liability: PLC – limited to the shares held; partnership – unlimited (except limited partners).
(e) Dissolution: PLC – wound up voluntarily by members or compulsorily by court order, liquidator appointed; partnership – by death, bankruptcy or insanity of a partner, expiry of the agreed period, agreement or court order.
Give both sides of the comparison under each heading.