Kimball Law handles many issues that confront small business owners.
These issues may involve preparing or interpreting contracts or other agreements such as:
We also deal with other special issues associated with the purchase or sale of a business or business assets and financing those transactions.
We can advise as to the best business structure for you and can incorporate or register your business or partnership as your circumstances require.
Sole proprietorship is the carrying on of a business with the view to profit by an individual.
Partnership is the relationship which exists between persons carrying on a business in common with a view to profit. It is a joint undertaking by two or more persons rather than by one person alone.
Significance of a Partnership
Working together, members of a group may pool their knowledge and wisdom and their physical and financial resources. There are also obvious disadvantages; disagreements may lead to stalemates or ineffective activity by the group; dishonesty or incompetence of one member of a group may lead to heavy losses suffered by other members; when the group wishes to make important decisions, it may lose valuable time in arranging a meeting. None of these problems exist where a person acts solely on their own behalf.
Liability of a Partner
A partner’s liability is unlimited to outsiders who have dealt with the partnership. Generally speaking, a person who is held to be a partner becomes personally responsible together with the other partners for the debts and liabilities of the partnership. After having obtained judgement against a partnership, a creditor may seize the personal assets of any partner or partners until their judgment has been satisfied.
It has been established as a matter of law that a corporation does have a separate legal existence of its own. A partnership merely represents the collective rights and duties of all the partners. However, a partnership may bring an action in the name of the partnership without naming all the partners as plaintiffs, and a third party may sue a partnership in its partnership name without naming all the partners as defendants. A partnership is treated as a separate entity for accounting purposes with its own assets, liabilities and financial statements.
In the event that certain matters are not expressly covered in a partnership agreement, the Partnership Act sets out a number of terms and conditions which would apply to the partnership. As examples:
A partnership agreement sets out as carefully and clearly as possible, the objects of the partnership, the responsibilities of each of the partners, the capital contributions of each to the firm, the time and energy that each will devote to the business of the firm, the respective shares of profits and losses that each partner will take, procedures for settling disagreements (usually by arbitration), and provisions for dissolution or for one or more of the partners to buyout the other partners.
Registration of Partnership
The law requires that a partnership be registered in Nova Scotia. The registration will give all the essential information about the partnership including the names and addresses of each partner, the name under which they intend to carry on business, the time during which the partnership has existed, and the acknowledgement that the persons named in the declaration are the only members of the partnership. Similarly, declarations must be filed in case of any change in the membership of the partnership or in the name of the partnership. Failure to register the partnership or changes in the partnership brings with it certain penalties.
Nature of a Corporation
The business corporation or limited company is a dominant feature of the modern business world; not only is it the main instrument of big business – it also rivals partnerships as a means of carrying on smaller enterprise. A corporation is a person in the eyes of the law. It is a separate legal entity. A corporation has separate rights and duties under the law.
A corporation is liable for its own debts, but its shareholders are liable only to the amount of the price of the shares that they have purchased from the corporation. On the other hand, a partner is liable for the debts of the partnership to the limit of his personal assets.
Transfer of Ownership
Since a shareholder has no liability for corporate debts even while he retains his shares, creditors of the corporation have no interest and no say in what he does with his shares. The shareholder may sever all connections with the company simply by transferring his shares to another person.
Shareholders have no authority to bind their company to contractual obligations – only officers of the company may do so. In a company, management is delegated to an elected board of directors that reaches decisions by simple majority votes. Major decisions may be required to be referred back to the shareholders, and depending on the issues, may require a two-thirds or three-quarters majority.
A corporation exists independently of any of its shareholders; a person’s shares may be transferred, but this does not affect the existence of the corporation. The corporation continues in existence perpetually unless it is dissolved by order of a court, by failure to comply with statutory regulations, or by voluntary surrender of its legal status to the Registrar of Joint Stock Companies.
A partner owes a strong duty of loyalty to the partnership, usually making it impossible for him to carry on another business independently. A shareholder owes no such duty to the corporation; he may carry on any independent business himself and may trade freely with the corporation as if he were a stranger.
Separate Ownership & Management
The separation of ownership and management ranks with limited liability as a most important feature of the business corporation. This enables an investor to invest a specific sum of money without taking an additional risk beyond the sum invested or having to take an active part in the management of the business affairs.
The corporate entity bestows certain legitimate tax advantages. The corporate tax rate which applies to those companies which qualify for the small business deduction is advantageous. Monies paid out of the company in the form of dividends are taxed at the maximum rate of 33 1/3%. These and other tax considerations provide certain tax planning advantages for companies.
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