Company Law: Definition of Business Partnership


Conventionally, a partnership is defined as an arrangement between two or more individuals to oversee the operations of a business and consequently share its liabilities and profits. The partners are collectively referred to as a firm and in a general partnership, all members share the profits and liabilities affiliated with the business (√Ālvarez-Gonz√°lez, Garc√≠a-Rodr√≠guez, Rey-Garc√≠a, & Sanzo-Perez, 2017). On the other hand, a company is an association of individuals who have joined to operate a business whose legal personality is separate from that of its members. There are differences between a partnership and a company.

One of the most perceptible variations between the two is implicit in the mode of creation. As noted earlier, a partnership is created by mutual agreement between two or more members. On the other hand, a company is created by legal incorporation into the Companies Act (Vanags & Drinke, 2021). Secondly, members who form a partnership are called partners. On the other hand, participants who form a company are termed, shareholders. Moreover, the documents required to register and run a partnership are quite different from those needed to enroll and control a company. In the case of a partnership, the mandatory document is called a partnership deed (Birinci, Berezina, & Cobanoglu, 2018). For the case of a company, the compulsory documents comprise the articles of association and memorandum of association.

Another area in which a partnership differs from a company is managed. In the case of a partnership, the people concerned with administration duties are the active partners, who formed the business. Contrariwise, a company is managed by a board of directors. The liability of members also predicates differences between a partnership and a company. In collaboration, participants have unlimited liability (Stachov√°, Papula, Stacho, & Kohnov√°, 2019). This implies that they are fully responsible for business debts that the partnership incurs. On the other hand, shareholders, who are the primary members of a company, have limited liability (Bower, 2018).

Lastly, the methods that are applied to conduct auditing and financial assessments in partnerships and companies are dissimilar. In a partnership, auditing is not mandatory since partnership firms manage their accounts as per the conditions elucidated in the partnership deed. On the contrary, auditing is compulsory in a company because the law requires every firm to adhere to auditing and accounting procedures conducted by a certified chartered accountant.

Advantages of Creating a Company

Remarkably, many advantages result from a company’s form of ownership. One of the most perceptible benefits is perpetual existence because the operations of a company cannot be terminated easily or without any reasonable grounds. For instance, deaths, insanity, or insolvency of shareholders and directors cannot influence the existence of a company (Catterson, 2019). Ideally, every company is a separate legal entity with the privilege of perpetual succession. This is a critical advantage that is not found in other forms of business ownership. Secondly, a company leverages professional management since eating a company leads to the advantage of reaping the benefits of professional management.

In a company setup, the management of the business is usually in the hands of a board of directors elected by the shareholders. The team consists of a team of experienced personnel who are capable of running the company’s affairs with utter expertise. The board of directors also hires professional managers to control the day-to-day businesses of the company (Glotova Tomilina, Doronin, Klishina, & Uglitskikh, 2019).

In this regard, the company benefits from professional management and has enormous potential for expansion. In any public limited company, there is no limit to the number of shareholders. Therefore, the company can grow by attracting more shareholders to invest in the business. Expansion of business in a company is facilitated by the issuing of new shares and debentures (Union, 2019). Conventionally, companies use their reserves for expansion.

Creating a company also benefits the owners through the diffusion of risks. Since the membership of a company is relatively large, the entire business risks are divided among several members of the company (de Campos, Gallon, & Becker, 2021). This is a great advantage especially to small investors since diffusion of risk shields shareholders from incurring exorbitant losses. Another advantage of a company is that it leverages limited liability terms. Conventionally, the liability of shareholders is limited to the face value of the shares that they hold or the guarantee given by them.

Disadvantages of Creating a Company

Despite having several advantages, creating a company comes with various pitfalls. Principally, there are stringent restrictions that any company must hold fast. The owners of a company have to ensure that it complies with all the required legal regulations. Adhering to these restrictions is quite costly and it takes a lot of time and effort to ensure that a company is fully compliant with the stated legal requirements. Additionally, companies are predisposed to a remarkable lack of secrecy (Kolesnikov, Pavlyuk, Radachinsky, & Rodionova, 2018).

According to legal provisions of the jurisdiction in which they operate, companies are required to avail particular statements to the Registrar of Companies and relevant financial institutions where they compromise the secrecy of the business.

At some point, a company has to provide its annual report to the shareholders. Since this procedure is done openly, the company’s competitors can determine the financial data of the company. Furthermore, companies are prone to management mischiefs because the directors and managers may opt to use the company’s resources to their advantage (Liu, Sun, & Jiang, 2017). Embezzlement of funds is a common trend in many companies. This behavior brings great losses to a company and may eventually facilitate its closure. It is also imperative to note that the absence of personal interest compromises a company’s operations.

Unlike a partnership, a company is run by salaried managers (Villani, Greco, & Phillips, 2017). Being normal employees, managers may portray insufficient commitment and interest in the affairs of the company. This results in inefficiency which later escalates to massive losses.

Advice on Which Option Would Be Better for Waqar and Sophia

From my standpoint, it would be better for Waqar and Sophia to create a company rather than run a partnership. As noted in the case study, the two are already partners. They have worked for some time supplying their products to different restaurants and market stalls. Notably, the partners have enjoyed enormous success from their joint venture. Forming a company is the most perceptible way of expanding a business venture to collect more profits (Puspitaningrum & Gayatri, 2019). Besides, a company business will offer Waqar and Sofia more advantages and benefits as compared to a partnership.

For instance, one of the most notable benefits is perpetual succession. Forming a company will ensure that the business started by Waqar and Sophia does not come to a sudden end. Rather, it will thrive and continue, regardless of whether its directors quit. The second reason to justify the formation of a company is implicit in the ability to access capital. By forming a company, Waqar and Sophia will have a great borrowing capacity. They will therefore be able to access better avenues for borrowing funds to boost their business and grow the size of their venture.

Employment Law

The Definitions of Worker, Employee, and Independent Contractor

A worker is any individual who works for an employer either under the terms of an employment contract or any other type of contract. In essence, a worker is perceived as the middle state between an employee and a self-employed status. On the other hand, an employee is someone who works for an organization, a company or an individual employer under the terms of an employment contract.

The agreement could be either written, oral, or implied. Remarkably, an independent contractor is a person working for an organization on an agreement basis for a specified period (Ravenelle, 2017). The contractor uses their methods and processes to operate the business on those terms. An independent contractor operates under an agreement of services to provide certain services to a client in consideration for payment; a good example of an independent contractor is a consultant.

Admittedly, an employee and an independent contractor differ in various ways. A worker operates under an agreement of service while an independent contractor works under a commitment of services (Dubal, 2017). A contract of service can be an oral or written commitment that serves as an employee for a given period. On the other hand, a contract of services is an agreement between two parties whereby one party provides a service to the other for pay (Kuhn & Maleki, 2017). Secondly, an employee has a comprehensive set of roles and responsibilities to do. On the other hand, an independent contractor is entrusted to undertake a specific project. He is left to complete the specific task using his methods. Whereas an employee is not liable for their actions, independent contractors are fully accountable.

Additionally, employees have long-term engagements with a single employer. They receive a salary and other remuneration benefits as agreed upon in the employment contract. Contrariwise, independent contractors leverage a fixed working term and are responsible for remitting their business and personal taxes (Del Conte & Gramano, 2017). On the underscore, there are several differences between workers and employees. For instance, employees are entitled to comprehensive statutory rights and legal protections. Contrariwise, workers are only entitled to fewer statutory rights such as protection from discrimination and unlawful deduction of wages. Secondly, a worker works temporarily, whereas employees work on an ongoing basis.

Marvin’s Case

Considering the case of Marvin, it is notable that he is an independent contractor. This is because he satisfies all the characteristics. As noted, Marvin signed a contract of services that does not place an obligation of commitment to either the employer or himself. Moreover, he works on his terms and only dedicates 30 hours a week to work for Waqar and Sophia. Another aspect that makes Marvin an independent contractor is that he has a team of other individuals who can stand in his place in the case that he is not in a position to attend work.


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