Company Structures

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Company Structures:

Sole Trader: A sole trader is a business that is set up and owned by one individual.

A sole trader is easy to set up as no legal documentation is required for start up. However sole traders have leagal responsibilities that they must attend to.

Legal Responsibilities:

  • Sole Traders may have to pay income tax and National Insurance contributions.
  • Once thier revenue and turnover reachers a specific level, Sole Traders must register for VAT. However some sole traders initially apply for VAT to claim back VAT they have paid even though they do not charge VAT.
  • Sole Traders may need a license to trade if they retail products such as Alcohol or  provide Taxi and Public Transportation services.
  • Sole Traders may need Planning permission to alter the purpose of a building or piece of land.
  • Sole Traders must comply with the legislation regarding Business practice.

Advantages:

  • The owner keeps all of the profit (unless there are employees, then wages would be distributed.)
  • The owner has complete control over the business and the decisions revolving around it,
  • Sole Traders are easy to set up as no legal documentation is required.
  • Sole Traders are flexible and are able to adapt and conform to changes.
  • Sole Traders can offer personalised services, since the business is small.
  • The business can qualify for Government aid.

Disadvantages:

  • Sole Traders have UNLIMITED LIABILITY.
  • It may be difficult for the owner to raise finance as lenders may find sole traders to risky to offer credit.
  • Sole Traders cannot adopt economies of scale.
  • The business has no continuity after the owner's passing.
  • The owner and employees may have to work long hours.

Partnerships: Partnerships are a business organisation that is typically owned by 2-20 people. Partners may draw up A DEED OF PARTNERSHIP.

Partnerships are easy and simple to set up as no legal formalities are required in order to set them up. Partners may draw up a deed of partnership in order to identify the rights of each partner in the event of a dispute.

Points covered by the deed of partnership:

  • How much capital each partner will contribute.
  • The profits and losses are divided amongst partners.
  • The legal process and procedure for ending the dispute.
  • The legal process for appointing and taking on new partners.
  • How much control each partner has.

Advantages:

  • Partnerships are asy to set up as they require no legal formalities.
  • Partners share the burden of running the business.
  • Partnerships do not have to publish financial information.
  • More owners can generate more capital.

Disadvantages:

  • Partnerships have unlimited liability.
  • Profit is divided amongst partners.
  • Partners may have differing views, which may lead to disputes.
  • Partnerships have limited growth potential.

Public Limited Companies: PLC's Public Limited Companies are business organisations that are owned by shareholders, where shares could be sold FREELY on the stock exchange.

Stock Market: The stock market exchange is a market for second hand shares.

Stock Market Flotation/ Initial Public Offering: IPO Initial public offering is the process of a firm

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