Prepare advice regarding what is the most suitable company structure taking into account the legal and regulatory requirements for the establishment of each type of company.
Business operations are governed by rules and regulations of a given state. In order to run business successfully, they have to be registered according to the form of business it would take. A business can be registered as either proprietary limited or a public limited company. Each business registration is governed by various rules and regulation which must be followed during operations. These rules and regulations are formulated in order to help in defining the size and operation of business so that tax is filled accordingly (Campbell & Campbell, 2009). The structure of business chosen have different impact when subject registered organization is either sued, when filing tax return and its ability to raise money in various events.
In a proprietary limited company, it should be formed by at least one member and a maximum of 50 members. Once registered as a proprietary company, its membership must fall within that range in order to be able to file returns within stipulated business category. In terms of directors, there should be at least one director who serves from within a given member state. The business is same as business and business liability is set out to be owner’s liability (Banhegyi, 2009). It is not organized for profit generation rather than a liability to its members. According to 2013 limited liability act, all shareholders may owe a proprietary limited company some form of liability. Within confines of law, a limited company may expand to under provided laws while discharging its services as required by law. In USA and for taxation purposes, limited proprietary company is regarded as just a pass- through subject and business owner may be required to report to the company as loss or an income. By following a state law, a proprietary company may decide to be taxed as an established public company. This is only applicable if the subject company fills form 8832 and it request to be treated as a regular limited company (Kinsky, 2012).
On the other hand, public company must have at least one shareholder but no membership limit. The number of directors in a public company is limited to three. On tax obligation, the business is quite different from its owners (Eisenberg & Nelson, 2002). According to regulation set out to govern its operations, public company should be able to pay its taxes on its own without affecting members’ property ownership. These form of business are formally recognized by law as self-sustaining so that it complies with tax obligation as a company and when its shareholders share their dividends. Similarly, on a public company, it is clearly stipulated in the law to report to its shareholders all decisions and laws amendments for approval. Mainly, decision approval is done through voting with their dollar value by either bidding company’s premium valuation or underrating its value below its required value. In this case, the operation stringent law requirements are usually set by both USA Securities and Exchange Commission (Kinsky, 2012). It requires public Company financial statement disclosure as well as form 10k which discusses the financial state of the company.
Banhegyi, S. (2009). Business management. Cape Town: Pearson Prentice Hall South Africa.
Campbell, D., & Campbell, C. T. (2009). Legal aspects of doing business in Asia and the Pacific. Salzburg, Austria: Yorkhill Law Publishing.
Eisenberg, R. S., & Nelson, R. R. (2002). Public vs. proprietary science: a fruitful tension? Academic Medicine, 77(12, Part 2), 1392-1399.
Kinsky, R. (2012). Teach Yourself About Shares: A Self-Help Guide to Success on the Sharemarket. Hob