My Business As A Private Limited Company example essay topic

The type of Business Organisation This is important in order to know how many people are involved in the business (e.g. sole trader one person). Sole Trader A sole trader is an individual who owns the business. e.g. Hairdresser Sole traders are risk takers and moneymakers. The advantages of being a sole trader are that you can make decisions quickly as there is no one else that needs to be consulted, the owner gets to keep all rewards and profit, flexible working hours, they are their own boss, being a sole trader makes businesses easy to set up and business affairs can be kept private. The disadvantages of being a sole trader are that there are limited sources of finance, the sole trader has unlimited liability (the responsibility to pay off every company debt, it may involve losing personal assets), No one to share workload, responsibility and risk often has limited knowledge and skills and there is no one to share ideas with.

Public Limited Company (plc) A company whose shares are openly traded on a stock exchange. A plc must have at least lb 50,000 in share capital in order to start up so it is harder to raise funds. Plcs have a lot more shareholders because their shares can be sold to the general public so they are much larger companies. The larger the plc is, the less likely it is that shareholders are involved very much in the business; it is more likely to be directors. The advantages are that it is easier to attract shareholders and a lot of shares can be sold making it easier to raise capital. Shareholders are likely to invest as they have limited liability.

The disadvantages are that information has to be given to the general public and competitors can easily see accounts. It is expensive to publish accounts as it can cost up to lb 100,000 for just one. Private Limited Company (Ltd) A company whose shares are not openly traded on a stock exchange. The owners / shareholders of an Ltd can only be friends or family so most Ltd are family owned businesses. It can be started with only lb 2 of share capital and these businesses are often smaller then plcs. There has to be a minimum of two owners and these are elected by shareholders and are usually majority shareholders.

Profit is divided between shareholders depending on amount invested and they must publish annual accounts. The advantages are that there is increased capital for the business as it is easy to raise through shares, shareholders have limited liability (they can only lose what they have invested) and private limited companies can continue for a very long time. The disadvantages of a Ltd are that they can be expensive and time consuming to set up, there are many legal responsibilities, it is harder to borrow money, there could be conflict between shareholders and directors and there are high tax rates. Partnership A partnership is two or more people trading together carrying on business with a view to make a profit... It consists of between 2-20 people. The advantages of being a partnership are that there are more sources of finance available compared to a sole trader, resources, ideas and knowledge can be shared, partners can specialise in different areas of the business, which could help with expansion of customer base giving the business competitive advantages and one partner can cover for another for holidays etc.

The disadvantages of being a partnership are that the partners usually have unlimited liability so they are all responsible for company debts. There could be arguments that lead to the dissolution of the partnership, profits must be shared between partners, slower decision making as every partner must be consulted, decisions of one partner are binding to the others and there are limited sources of finance. Having consider the different types of business organisations, I have decided to start up my business as a Private Limited Company so that all the shareholders are people I know and it will be easy to gain capital. This will also mean I will not have to publish annual accounts and will save a lot of money not doing this and rivals will not be able to see how well or badly I am doing..