For starting a new business like the computer hardware manufacturing company, it is better to choose such form of ownership as partnership. A partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which all have invested. (Lucas 2002) The most basic form of partnership is a general partnership, in which all partners manage the business and are personally liable for its debts.Two other forms which have developed in most countries are the limited partnership(LP), in which certain "limited partners" relinquish their ability to manage the business in exchange for limited liability for the partnership's debts, and the limited liability partnership (LLP), in which all partners have some degree of limited liability.
Setting up a partnership is relatively easy. All that is required is for the people concerned to agree to share the decisions within a business, or start to work together as joint owners of a business.If this happens, they are automatically considered to be partners and will share both the responsibility and profit. (Lucas 2002) As there is more than one owner, there will be more money available to help set up the business.
New partners can bring in new skills and experience that may help the business to make more profit. You can share out the responsibilities between the partners. This means that no single person is responsible for running all of the business. If the business experiences financial difficulties there will be other people to share the costs with you.This reduces the risk of losing money.
Expanding the business can be made easier as new partners can be introduced. They may put money into the partnership which could be used for buying new, or updating existing, machinery. (Lucas 2002) Some financial details can be kept private from others, as you don’t have to publish your accounts - many people do not like others to know how much they earn. One big advantage of a general partnership is that you don't have to register with your state and pay an often hefty fee, as you do to establish a corporation or limited liability company.
And because a general partnership is normally a " pass through" tax entity (the partners, not the partnership, are taxed unless you specifically elect to be taxed like a corporation) filing income tax returns is easy. Unlike a regular corporation, there is no need to file separate tax returns for the corporate entity and its owners. But given that the business-related acts of one partner legally bind all others, it is essential that you go into business with a partner or partners you completely trust.It is also essential that you prepare a written partnership agreement establishing, among other things, each partner's share of profits or losses, day-to-day duties and what happens if one partner dies or retires. (Lucas 2002) General partnerships can thrive when each partner brings a specific strength to the business. If each partner takes on a defined role and there general agreement on the business plan, goals, and visions from the outset, a partnership can be advantageous.
Work can get done more quickly, and having several partners involved will increase the potential of acquiring resources and attracting backers. The success of such an endeavor depends largely on the personalities of the parties involved. (Lucas 2002) A limited partnership can be attractive for a limited partner who can provide funding but not expertise, and does not have the time to devote to being a hands-on part of the business. It is much easier to attract investors as limited partners.A limited partnership allows for general partners to use their expertise, make key decisions, and manage the business. Limited partners can leave the business or be replaced, without the need for the limited partnership to be dissolved.
An interesting aspect of the limited partnership is that partners are able to allocate profits, losses, and gains as they see fit, regardless of the equity interest of a specific partner, and subject to compliance with tax laws. This, too, can be attractive to prospective investors. (Lucas 2002)
