Cloud 9 Essay

I hope you’ve been well. Following our discussion on 6th November 2015, we are writing to provide advice to you as instructed on factors to be considered in converting your current business general partnership (“Cloud Nine”) to a private company limited by shares. I understand that you are looking into business expansion and your concern is that you do not want your personal assets to be liable for any debts or losses incurred during the course of your business. You have also conveyed your wish for your children to inherit your business in the future. Hence, to provide you with a better understanding on the implications of your business conversion, I will be laying out an overview of the key advantages and disadvantages of forming a private

Limited liability. Contrary to the general partnership, both of you will be severally and jointly liable for all the liabilities incurred where your personal assets may be at stake. In the event of winding up, liabilities of the members of a private limited company will only be limited up to the amount he has agreed to contribute in exchange for his shares. This is because the company’s liabilities are on its own.

2. Attracts investors/investments. For security investment purposes, investors are more inclined to invest in a company with legal separation between the business and personal assets of the members and directors. This will directly/indirectly provide Cloud Nine with additional capital injection to help boost the company’s expansion and growth. However, shall the company plans to raise capital through share offerings in the future, consent from the internal shareholders must be obtained beforehand. (Details about shares transactions will be discussed

In view of your business concerns, I would like to strongly recommend you to give due consideration in converting Cloud Nine into a private limited company. While incorporating and managing a private limited company may be a complex and compounded process, the advantages of having a private limited company would help leverage Cloud Nine’s reputation and financials in the long run. In other words, the business conversion to a private limited company will also be aligned with your key interests as we have discussed