Company Law Essay Example | Topics and Well Written Essays - 3000 words

Company Law - Essay Example   Explanations of the options available to John with reference to relevant statutory provisions and case law On the initiative undertaken by John with regards to changing the legal formality of the business, there are a number of options available; I would advise him to incorporate his business since it will offer him a number of advantages relating to returns and management of the business. Incorporation entails the aspect of registering a business entity under the companies’ Act where it runs its activities as a separate legal entity in which the owner is free from the liabilities of the business. The following are the benefits attached to incorporation of a business: a. The business once registered as a separate entity i.e. as a company, it acquires independent corporate existence features, upon these features, the owner is distinct from the company and therefore cannot bear any liability of the company or be compelled to pay any debt owed by the entity.1 b. The business once registered will start living its own legal life upon which all the liabilities which John in his earlier sole proprietorship, would to bear as an entrepreneur. He will be protected by having limited liabilities in that only the charges for shares and capital he will incur after which his personal property, is safeguarded from any liability the company may suffer. c. A company has a characteristic of perpetual existence and under this feature cannot end unless under the provided legal mechanisms. Once he registers his business as a company, it has ability to never die as the death of the owner cannot affect the existence of the company.2 d. The company once registered, is required to be run by professionals and proper management will be achieved unlike other modes of running business activities. e. Unlike in his current business organisation, a company once registered under the Act t acquires the ability to own separate property in that, it can hold the property in its own name and this deters any other persons even its directors, from claiming the company’s assets. f. Also, with the ability to transfer the shares of the company, there is a room to raise more capital further facilitating the aspect of increasing production by expanding business activities. g. The aspect of incorporation also attracts numerous merits of taxations. This achievement of saving taxes is done through for instance, leasing company’s property from which one reduce the amount of tax paid since the holders of such leases are to pay property taxes. This advantage has been well developed in our jurisprudence such as in the case of Macaura V Northern Assurance ltd, whereby in this case the claimant who had the majority shareholding of the company had gone to court to claim for compensation from an insurance company upon the fire tragedy which burnt all the company properties, their honourable justices were of the opinion that the companies properties belong to the company and not the holder of the large number shares and only the company through its agents can claim this compensation. This position clearly outlines the fact that the properties of the company are safeguarded as those of the company and in case of any damage on them still the members of the company cannot be held liable of the same. h. By creation of an independent corporate existence, the owner will be able to keep a private and confidential identity away from that of business.3 i. Also when he

Reporting Requirements Memo Essay Example | Topics and Well Written Essays - 1250 words

Reporting Requirements Memo - Essay Example The memo ends with the comparison of the accounting reporting practices of the two entities. Reporting requirements for private sector, not-for-profit organizations under Financial Accounting Standard Board guidance The Financial Accounting Standard Board has specific accounting reporting requirements for all types and kinds of health care organizations. This also includes the private sector not for profit nursing homes. The Financial Accounting Standard Board have issued several standards especially for private not for profit nursing homes. Few of the standards that have been introduced are â€Å"Accounting for Contributions Received and Contributions Made,† â€Å"Financial Statements of Not-for-Profit Organizations† and â€Å"Accounting for Certain Investments Held by Not-for-Profit Organizations†. The American Institute of Certified Public Accountants’ (AICPA’s) accounting and audit guide for Health Care Organizations have made these statements m andatory. Both AICPA and FASB promote the accrual method of accounting. An accrual method accounting gives a complete, accurate and meaningful report about the financial condition of the organization. The accounting period should span for one year. A private sector not for profit nursing home’s financial statements should have a balance sheet, a statement of operations, cash flow statements and statements showing changes in net asset. If the not for profit organization decides to invest in financial assets the transactions that involves financial instruments have to be recognized on the settlement date. Any transactions that involve a third party have to be measured at fair value. For investments in debt securities, the securities that are not held up to the maturity period are recorded at fair value with subsequent changes in net assets and net income. The organization can invest in debt bonds at amortized rate without any restriction. The debt security should be measured at fair value and any changes in net income should be recorded. The principles for investment in equities are that the shares that are quoted in the active market should be recorded at the fair price and the resulting change in the net assets should also be recorded. Unquoted equities can be measured at the actual market price (Carmichael & Rosenfield, 2003). Investments in mutual funds will also be considered as equity investments. Derivatives that involve hedging characteristics should be measured at fair price. A private nonprofit organization should be very careful in selecting the methods it wants to use to measure its investments so that its relationships with its benefactors are not compromised. It should successfully incorporate the unrealized losses and gains in its financial statements. Transaction costs that arise due to purchasing of financial instruments should be capitalized and will be measured at the amortized cost. At the end of each accounting period the organization has to check for assets that are impaired. If there is any such asset its carrying amount should be reduced to the highest of the amount the organization expects to generate by selling the asset or the present value of the expected future cash flow of the financial instrument. Accounts receivable will be treated in the same way as debt securities. But receivables that are not due for a minimum of one year and are without market rates