3.1.2 Understanding different business forms


Understanding different business forms


Advantages and disadvantages of sole traders, private companies and public companies

Sole trader

·        You are your own boss

·        Get to keep all of your own profits

·        Easy to set up

·        Make key decisions

·        Flexibility with work hours

·        Ability to offer personal service

·        Unlimited liability

·        Limited access to capital

·        Long hours

·        Pressure of being solely responsible

·        Lack of continuity (when you die the business dies)

Private limited company

·        Limited liability

·        Shorter hours

·        More access to capital

·        Only 50 shareholders

·        Shares only bought and sold with agreement of existing shareholders

·        Must publish accounts

Public limited company

·        No maximum number of shareholders

·        Limited liability

·        Easy to sell out on the stock exchange

·        Divorce between ownership and shareholders

·        Must publish accounts

·        More complex to set up

The role of shareholders

A small Ltd may have as few as a couple of shareholders whereas a big multinational may have tens or even hundreds of thousands. Some of them may be individuals but many more will be investment funds of some form, such as pensions.

Ordinary share capital


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