Advantages And Disadvantages Of Kind Of Company †Free Samples

Question: Discuss about the Advantages And Disadvantages Of Kind Of Company. Answer: Introduction There are two types of business forms that can be setup; each form has their own share of advantages and disadvantages. While going forward with this decision of which type of company to choose, the company client should focus on few thing, which kind of business that it wants to operate, which kind of company will be suitable for that kind of business, the possible advantages and disadvantages of kind of company ,and whether it has the requester funds that might be needed to start such a company. After the client has figured out the required information, it can carry forward with the formation of the company. Below we will discuss the advantages and disadvantages of each form of company and what will be suitable for the client in the end. A company is the kind of legal entity that is formed as per the regulations under the Corporations Act 2001. A company has its own legal existence and also the identity of its shareholders must be different form its shareholders and directors. A co mpany has its own set of rules that must be followed and also if the company does not have its constitution, it goes by the "replaceable rules" of the Corporations Act 2001. A proprietary company is privately held company that can either be limited or unlimited. Such types of companies are present in Australia and South Africa. A proprietary company is the type of company that is defined under section 45A(1) of the Corporations Act 2001. Such type of companies is required to have not more than 50 members. These companies are also not allowed to raise funds from the public that is the main issue that is there with private companies, that they cannot raise money from the public. It cannot engage itself into any activities that can force them to raise money from the public by issuing a prospectus. A prospectus is a document that is issue by the company stating the terms of offer for shares, to raise money from the public, for their business operations. There are two types of proprietary companies, namely large proprietary company and small proprietary company. Both are differentiated on the basis of revenue earned and the level of more operating activities, and the total amount of fund raised by the company. A proprietary company is classified as small company if it meets the following requirement- The total assets of the company is less than $12.5 million, when the year ends The total number of employees in such of as small company should be less than 50 members at the end of the financial year. The overall gross revenue in the year end should be less than dollar 25 million In case of large proprietary companies, they are required to get their books of account audited and also to appoint an auditor for the same. The small companies are required to get their account audited and prepare their financial statements in the same manner, if they are required to do so as per the requirement of the Australian Securities and Investments Commission (ASIC), or in case of a foreign company , shareholders that are holding more than 5 present of the voting power requires to do so. In case of a proprietary company, the liability of the shareholder is restricted to the number of shares raised held by them, which means that they are liable just for that much amount of shares and not for anything beyond that. This is the situation in case of a limited company. When it comes to an unlimited proprietary company, in which there is a share capital, but the only difference is that the liability of the shareholders is not limited. (https://www.afigec.com/, 2017) The main advantages of forming a proprietary company is- The liability of the shareholders is limited; they are not liable for anything beyond their share capital. The company will keep continuing legally, even if the members cease to exists, which means that these companies will have a legal existence The shares must be easily transferable between the shareholders and the other persons. Also the company will have various tax benefits if the rate of personal income exceeds the rate of the company The main disadvantages with this kind of businesses are- They cannot raise money from the public, so in that way they have to lose on a lot of money that might be needed for the support of business activities. They are subjected to a lot of government regulations(Incorporator.com.au, 2017) Another form of company is the public company. This company have no limit on the number of shareholders and can raise money from the public, by issuing prospectus to the public for the issue of shares. The share capital can be divided into shares of particular denomination and then it can be given to the public, to raise money from the same. Most of the existent public companies were previously private companies that have chosen to go public. All the multinational companies are public companies. The main advantages of this kind of companies are- they have an access to the equity fund market ,a s well as the debt market to raise the requisite amount of fund, for their companies. They can also additional shares in the public to raise money after the initial offering. That is the kind of many advantages that a public companies has , the area of operation is also large and the total amount of money involved in such kind of companies is also large, so if the client is having so much funds , they can go ahead with such kind of companies. The main disadvantages with this kind of business are that there is a lot of control issues involved with the same. And also there are a lot of regulations that a company has to abide by the various government regulations. A public company must have to meet the various government regulations requirements and the various reporting requirements that the company must abide by. There is also lack of control, because there are so many shareholders, so it is not possible to establish authority in such type of company. (Asic.gov.au, 2017) There are various concerns that is there for establishing for a company in Australia- There must be permanent establishment of the client. The client needs to make correct allocation of profit The must be correct implication of the Goods Services Tax (GST) liability The companies would also be required to pay penalty in case they fail to comply with the following requirements of formation of accompany The company must also form the double taxation treaty rules There must be harmonizing policies that must be followed(Registeracompany.com.au, 2017) There are various regulations and other government disclosures that the company needs to comply with, that are the main requirements that the company must need to follow that. Conclusion The client needs to take decision based on the kind of business operations that the kind of company that they need. Both of the same have their own share of their advantages and disadvantages and on the basis of the same, the client needs to take the decision the kind of company it wants to establish. (www.nfplawyers.com.au, 2017) References: Asic.gov.au. (2017). How to start a company | ASIC - Australian Securities and Investments Commission. [online] Available at: https://asic.gov.au/for-business/starting-a-company/how-to-start-a-company/ [Accessed 27 May 2017]. Incorporator.com.au. (2017). Incorporator.com.au - Proprietary company compared with Public Company (Australia). [online] Available at: https://www.incorporator.com.au/l3/21_01_Proprietary_company_compared_with_Public_Company_Australia.asp [Accessed 27 May 2017]. www.nfplawyers.com.au. (2017). Checklist-to-establish-a-Public-Company-Limited-by-Guarantee. [online] Available at: https://www.nfplawyers.com.au/wp-content/uploads/2012/07/Checklist-to-establish-a-Public-Company-Limited-by-Guarantee.pdf [Accessed 27 May 2017]. Registeracompany.com.au. (2017). Company basics - Register a Company Australia. [online] Available at: https://www.registeracompany.com.au/faq/company-basics.cfm [Accessed 27 May 2017]. https://www.afigec.com/. (2017). company-formation-in-Australia. [online] Available at: https://www.afigec.com/data/en/pdf/142/company-formation-in-australia.pdf [Accessed 27 May 2017].