Question

“In the context of three co-founders looking for equal ownership and management of a business, the

limited company is superior to the partnership structure. Furthermore, the limited company provides

limited legal liability, whereas in a partnership all partners are liable for all the debts of the partnership.”

To what extent do you agree or disagree with the above statements? Write an essay with relevant legal materials.

Answer 1

The limited company provides more benefits in terms of rights and liabities of members of the company whereas in partnership firm, all partners are severly liable for all the debts of the partnership.

In partnership, if there is any default in payment of debt by the firm, all the partners are held equally liable. Similarly if there is any fraud committed by one of the partner with anyone outside the firm, all the partners are held equally liable for any losses to the conerned party due to mischief of one of the partner.

As per legal provisions, If there is any defaut by company, no person can be held personally liable. The company is held liable for default. Director of the company cannot be held personally liable.

If any due is recoverable from the company, that cannot be recovered from the personal assets of the directors of the company. Since company is an artificial person in the eyes of law , it has seperate legal entity and can be sued in its own name.