Company Structures
- Created by: nadiaelkafrawy
- Created on: 09-04-18 23:40
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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