A partnership is that form of business where two or more enjoy their share in the business. All the partners assume same responsibility to manage the business, and share income and loss as per their capital investment ratio. The partners can claim their income when they file their personal tax returns.
In the business two persons are performing the business operations which is considered as partnership firm. When B Joined D it become a partnership firm because it is owned by the more than two owners. All the partners have to perform equal amount of work, duties and responsibilities.
A partnership is a form of business where more than two persons enjoy their share in the company. All the partners have a same responsibility to manage their business, and share income and loss raised from the business. The partners can claim their income when they file their personal tax returns. There are three types of partnership General partnership, and Limited partnership.
The advantages of partnership are given below:
Easy to establish
The person can easily establish the partnership, it doesn't require more legal requirements, and the person can start his or her business without any registration. The person should have Permanent Account Number (PAN) card to start the business. It is not compulsory for the person to get registered under the partnership act.
The partnership firm have unlimited resources, and funds to invest in their business. The business area is more as compared to sole trader. The partners can get the advantage of large-scale economies.
Large number of ideas
In partnership, the partners have more ideas which can be used in their business in order to expand the business. Every person has good skill, and knowledge which can be used in business to take the important decisions of the business.
The Disadvantages of partnership are given below:
Lack of harmony
The partners may have lack of harmony in their business, they may have different opinions, and views which can leads into disharmony, and lack of management. The partners may blame other partners for loss. It can result into the dissolution of the firm.
The partnership firms are not stable in nature, it can come to an end with the death of one partner, and it can be closed if one partner wants to close down the business, or may get dissolve through court.
The partnership may get terminated with the death of one partner, the person has to close down their partnership firm by distributing the assets, and liabilities by sharing the profit, and loss accumulated from the partnership.
A corporation is considered as an separate legal entity. The corporations enjoy their responsibilities, and rights which are possessed by the individuals while they get enter in contracts, or borrow sum amount of money.
The difference between a C corporation, S corporation, and a limited-liability company are as follows:
These corporations are considered as a separate taxable entity. These corporations have to pay the tax at a corporate level at an initial level, and then at the individual level, the tax is paid on the dividends. In C corporations, there is no restriction on the ownership.
These corporations get pass-through the taxation entities. These corporations don't have to pay income tax at a cooperate level. The profits, and losses which get raised in the business get passed through the personal tax returns of owners. When the tax is due it will be paid by the owner at the individual level. In S corporations, there is a restriction on number of shareholders, it can't be more than 100.