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Question No 14:
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Differentiate between
i. Sole tradership, Partnership & Joint Stock
Company.
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ii. Public & Private Limited Company.
iii. Article Of Association & Memorandum Of
Association. nli
iv. Shareholder & Debentureholder.
Answer:
i. Differentiation Between Sole Tradership, Partnership
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1. Definition:
SOLE TRADERSHIP:
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PARTNERSHIP:
Partnership is the relationship between persons who have
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the ownership of which is the condition of membership
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The other points of difference between Sole tradership,
Partnership and Public Limited Company (JSC)are
mentioned below.
POINTS SOLE PARTNER PUBLIC
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SHIP LIMITED
PROPRIETO
RSHIP COMPANY
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(JSC)
2.Formation There are no There is a There is a long
complicated simple and
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legal
documents
are
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required.
3.Legislation There is no Activities of The activities of
or Act legal Act of partnership the PLCo. Are
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4.Number of There must be There must There must be
Members only one be minimum (7)
owner in sole minimum members and
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tradership. (2) there is no
members restriction on
and not maximum.
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more than
(20).
5.Capital The capital is Its capital is Its authorized
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increased or described capital is
decreased in the mentioned
according agreement. in the MOA. It
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managed by can take cant take
the part in the part in the
owner manageme management.
himself. nt of the So,
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business. management
depends
upon
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directors of the
company.
8.Liabilities The liability of The The Liability of
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the owner is Liability of shareholder
unlimited. The the partner is limited to
personal is the value of
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liable to
pay debt.
9.Title There is no There is no It is necessary
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preparation preparation company
any other any cant start any
legal other legal work whether
documents. documents the
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except certificate of
registration, commencemen
which is t of business is
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also on not received.
your option.
11.Working The life of The life of Public Ltd
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Life sole partnership enjoys long life.
tradership is short. The death
is too Because of shareholder
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business.
12.Submission There is no There is no There is
of Reports need to need to compulsory to
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report to
the
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registrar.
13.Changes The owner The The changes in
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can change partners MOA and
anything can make AOA can
according to any be made to
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his mind. change limited extent
in the as provided by
agreement the law.
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as and
when
they feel.
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14.Audit The audit of The audit The audit is
books of of books of very
accounts is accounts compulsory.
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method. requirement
of Company
Ordinance
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1984.
15.Tax The rates of Each Double tax is
taxes are partner paid by the
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owner. on his on the
income. shareholder.
16.Profit Sole Profit & Some amount
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Distribution tradership is loss is is distributed
an only in distributed among
which among the
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businessman the shareholders
enjoys partners according to
100% profit according the number
and also to of share they
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have to partnership held, and
bear all the deed. other
loss. amount is kept
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in reserve.
17.Books of The owner The The books of
Accounts can keep and partners accounts to be
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is not
compulsory
by Act
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1932.
18.Prospectus There is no There is no In Public Ltd
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need and need and Co. it is
requirement to requiremen necessary to
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issue t to issue
prospectus. issue prospectus to
prospectus general public.
of firm.
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19.Promoters The owner Minimum 2 There must be
himself is the and at least 7
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promoter of maximum promoters.
the business. 20 partners
are
promoters.
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20.Size of It is suitable It is It is suitable for
Business for small suitable for large size
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the law.
partnership
.
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his sale his transferable to
business share any person.
without any without the
restriction. consent of
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all
other
partners.
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23.Dissolution The Dissolution Dissolution of
dissolution of of Public Ltd Co.
sole partnership is a very
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tradership is very complicated
does not easy. process.
require any There are
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for this
purpose.
24.Withdrawal The sole Any partner The members
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25. Sole Partnership The formation
Expenses tradership bears less expenses are
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of Formation bears less formation much more
formation expenses than the
expenses as as formation of a
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compared to compared partnership or
other forms of to a JSC. sole tradership.
business. nli
26.Payments The sole All the The share
of Debt tradership is partners holder is
liable to are liable to not
pay the debts pay the responsible to
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Conclusion:
Sole proprietorship business plays an important role in under
developing countries like Pakistan. It is helpful in equalizing
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under developing countries like Pakistan. The partners are of
equal status, ability and resources. In JSC, it means if
management of company is good then it is considered as best
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suited. The formation of a company is need of the day. JSC are
fit for large scale business due to country grows.
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ii). Differentiation between Public & Private Limited Company:
1. DEFINITION:
mentioned below.
Other Points of DIFFERENCES:
POINTS PUBLIC LIMITED PRIVATE LIMITED
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COMPANY COMPANY
2.Formation There is a long and There is a complicated
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complicated process process but easy as
for the formation compared to Public
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of public limited co. Limited Company.
3.Legislation The activities of the It is govern by
PLCo. are controlled Companies Ordinance
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by 1984.
Companies
Ordinance 1984.
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4.Number of There must be Minimum number of
Members minimum (7) members is (2) and
members and maximum limit is
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there is no (50).
restriction on
maximum.
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general public.
7.Management All the shareholders The management of
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directors of the
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company.
8.Liabilities The Liability of The Liability of
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shareholder is shareholder is limited
limited to the value upto the value of
of shares they held. shares, which they held
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with them.
9.Title It is necessary to It is has to use the
use the specific specific word Private
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word Public Limited with its
Limited with its name.
name.
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10.Legal The Public limited The Private Ltd Co.
Documents company cant start required only
any work whether incorporation certificate
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received.
11.Working Life Public Ltd enjoys Private Ltd also enjoys
long life. The death long life but less than
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registrar.
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13.Changes The changes in The changes in MOA
MOA and AOA can and AOA are
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be made to very complicated
limited extent as procedure.
provided by the law.
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14.Audit The audit is very Audit of books of
compulsory. For accounts may or may
this purpose, not be compulsory. It is
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legal methods are optional case.
used by the
Chartered
Accountants under
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the requirement
of Ordinance 1984.
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1984 but to a little bit.
18.Prospectus In Public Ltd Co. it is There is no need and
necessary to issue requirement to issue
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prospectus to prospectus.
general public.
19.Promoters There must be at There must be at least
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least 7 promoters. 2 promoters.
20. Directors There must be at
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least 7 directors. 2 directors.
21.Size of It is suitable for It is suitable for medium
Business large size business. business.
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compulsory by law.
23.Transfer Shares of Public Ltd The shares of Private
of Shares Co. are easily Ltd Co. are not
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of Shares for minimum for minimum
subscription. subscription.
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26. Written The directors The directors written
Consent of written consent is consent is not required.
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Directors required.
27. Listed Public Ltd Co can Private Ltd Co cannot
With Stock be listed with be listed with stock
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Exchange stock exchange.
exchange.
28. Quorum In directors meeting In directors meeting
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greater.
29. Publication Public Ltd Co must There is no restriction
publish its annual for Private Ltd Co is
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31. Secrecy Public Ltd Co has Private Ltd Co has
less secrecy. more secrecy.
32. Powers of The powers of The powers of directors
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Directors directors are not so are so wide.
wide but depending
upon article of
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association.
33. Legal Public Ltd Co has to Private Ltd Co has to
Restrictions face strict legal face more but less strict
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restrictions. legal restrictions.
34. Area of Area of ownership in Area of ownership in a
Ownership a Public Ltd Co Private Ltd Co is
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CONCLUSION:
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1. Definition:
Memorandum Of Association (MOA):
The MOA is the most important document of the company. It
defines the relationship between the company and the public.
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document setting out regulations by laws
the details of the which govern the
company existence. internal origination and
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conduct of a company.
3.Scope MOA states the work AOA contains the set
a company can do. of rules and
regulations to
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complete the objects
stated in MOA.
4.Status A MOA is subordinate An AOA is subordinate
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to Companies to Companies
Ordinance 1984. Ordinance 1984 and
MOA.
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Table A of Companies
Ordinance 1984.
7.Preparation It is prepared under It is prepared under
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9.Importance It has a primary It has a secondary
importance in the importance in the
formation of the formation of the
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company. company.
10.Nature It is a constitution of It contains the rules,
the company. which govern the
administration of the
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company.
11.Objects MOA only lays down AOA contains the
the objects of the procedure for
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company. achieving the
objects of the
company.
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resolution of the
court.
13.Relation- ship It is the relationship It is the relationship
between the company between the members
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16.Clauses The MOA has usually The AOA has many
six clauses. clauses. It is not
According to limited to six clauses.
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Companies Table (A) has (85)
Ordinance 1984. clauses for
operating the
company.
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CONCLUSION:
In short, AOA is used only by the management of company
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because it the secrets container and secrets should not be
unfold. MOA is used by management as well as outsider to
information related to company.
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1. Definition:
Shareholder:
The total capital of the company is divided into small parts /
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Debentureholder:
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Debentureholder.
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Other DIFFERENCES BETWEEN Shareholder &
Debentureholders:
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Points Shareholder Debentureholder
2.Nature The amount paid by the The amount given by the
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shareholder is kind of an debentureholder is kind
equity instrument. of an equity instrument.
3.Liquidity These are considered as These are considered less
liquid instrument. liquid instrument as
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compared to Shareholders.
4.Return These get return in the These get return in the form
form of dividend. of Interest.
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5.Risk Shareholders share the Debentureholders do not
Sharing risk of the company. share the risk of the
company because they get
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fix interest.
6.Time Period The life of shareholders is Debentureholders are
short as they can be considered to be long term
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Profit & Loss right to share the profit concern with the profit
& loss of the company. & loss of the company.
9.Withdrawn These can withdraw These cannot withdraw
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Justification expressed in terms of concept of interest in Islam
Islam. because the debentures
contain the element of
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interest.
11.Prefrence Shareholders have the Debentureholders have the
secondary right to primary right to claim for
share the value of debts at the time of
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assets at the time of liquidation.
liquidation.
12.Security Shareholders are Debentureholders are
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considered to be Insecure. considered to be secured.
13.Liability Shareholders may be Debentureholders are not
considered as considered as
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participate in the participate in the
management of the management of the
company. company.
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19.Nature of The amount contributed The amount contributed by
Amount by the shareholders is the debentureholders
called companys capital. is called loan to the
company.
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20.Existance Shareholders can exist Debentureholders can exist
both in private & public only in public Ltd
Ltd company. company.
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Conclusion:
In the end we can say that the shareholders are the owners of
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