Limited Company These Businesses example essay topic

1. SOLE TRADER Single person owns the business Because of their size, generally most of them work on their own however they can also employ people. It is easy to set up as there is no legal documents required They all have 'unlimited liability' which means that they have to sell their own possessions in order to meet business debts if the business goes bankrupt. Entitlement to all the profits They have all the responsibilities They have the full control over the business It is hard to raise money, very few financial sources are available 2. PARTNERSHIP Generally between 2 - 20 partners and they all have joint responsibility for owning the business. Partners all have unlimited liability and they may have to sell all their own possessions to meet debts of the company.

Companies Act 1985 allows accountants and solicitors to have more than 20 partners. Partners draw up an agreement called 'Deed of Partnership' which clearly sets out how the partnership should operate. Partners can also have 'sleeping partners' who do not participate in day to day running of the business but they share profits and put money in to the business. Profits shared between partners. It is easy to raise money Partners will have less responsibility as they will be sharing between them. 3.

LIMITED COMPANY A. PRIVATE LIMITED COMPANY (LTD) These type of businesses owned by shareholders They run by directors who actually make day to day decisions about running the business. The shares can't be bought by the public and they cannot be advertised for sale. They all have 'ltd' at the end of the company name. The shareholders have more control over the business Shareholders have 'limited liability' which means that the owners wouldn't have to sell their own possessions to meet debts of the company.

They also don't have to publish an annual report and balance sheet to the public. They have got the ability to raise capital through the share issue and this will enable them to expand their business. In order to set up a limited company, we should produce; 1. Memorandum of Association which sets out the company's name, registered address, objectives and capital 2.

Article of Association which sets out the rules and procedures for issuing and transferring shares, the procedures and timing of company meetings, the details of how accounts will be kept and recorded and the details of directors and their responsibilities. 3. Once the documents above have been accepted, the limited company will receive a Certificate of Incorporation which sets up the company as a legal body in its own right in another words it's the birth certificate issued by the company house. B. PUBLIC LIMITED COMPANY (PLC) These businesses owned by shareholders They can sell their shares to the public on the stock exchange however, it would also mean loss of control over the business They run by directors who make day to day decisions They must issue share capital of at least lb 50000 in order to set up public limited company. They also have to publish an annual report and balance sheet which should be available to everyone.