Types of Company Formations
A company, also called as a corporation, is a legal entity legally representing an institution of human endeavor, whether commercial, non-commercial or a combination of both, having a single central goal. Company members generally share a similar purpose to accomplish some, defined objective. The company therefore needs a board of directors to exercise the powers conferred on it by the articles of incorporation. However, there are situations where the company may have different directors at different times. These situations are referred to as “incorporated partnerships.”
Limited Liability Company: Limited liability companies are companies that may have different classes of directors such as owners-managers and owners-directors. In these types of cases, the company shall be considered a partnership and all the partners shall be liable for the company’s debts unless otherwise prescribed. Similarly, in case of a partnership, the company shall have one or more partners and the partners shall be jointly and severally obliged to perform their obligations under the partnership agreement.
Sole proprietorship: A sole proprietorship is an entity that is owned and operated by one person. It may be a partnership or an unincorporated body. Under the Companies Act, only the registered office of the director can be utilised for the business. Under the Companies Act, the proprietor is also liable for the company’s debts unless otherwise provided.
Limited partnership: A limited partnership is an unincorporated body that consists of two or more parties. Partnerships are normally entered into for the benefit of all the partners involved. However, there are certain partnerships that benefit the partners directly. Usually, such companies may be in the manufacturing, importation, distribution or marketing of a product. There are many other purposes for which a company may be established, but each of these purposes requires a different method of incorporation.
Limited liability partnership: A limited company means a company where the directors are members of a corporation and all the share holders are legally separated and distinct from each other. Every partner in a limited partnership is personally liable for all the liabilities of the partnership and its assets. A limited company means any company that has neither management nor control, and all the debts and equity of the partnership are owned and managed by its members.
Similar to a limited liability partnership is a corporation. However, a corporation differs from a partnership in that it is generally recognized as a separate entity from its shareholders. A corporation may have voting rights and may own assets and liabilities like a partnership. The ownership structure of a corporation is determined by the law. Under the Companies Act, each registered Australian company must have a Board of Directors meeting at least twice annually, a General Meeting of shareholders to act on the corporation’s behalf and submit articles of company control to the Board.
An unincorporated business also cannot be a public company. Unlike a company limited by shares, an unincorporated business may be either public or private. It may be incorporated either by shareholders meeting in a corporate court or by applying to the courts to form a company. If an unincorporated business is formed as a corporation, the officers of the company will be considered to be the public.
The powers and duties of directors of a private company shall be determined by the law. This includes the power to direct the sale of shares and the power to bind the company to enter into a partnership. For all other powers and duties of a public company the shareholders will decide. In all cases a director can be removed only by the general assembly of the corporation.
