Understanding different business forms


Private sector businesses - (Owned by the shareholders of by private individuals)

  • Sole traders - when individuals establish and operate a business on their own
    • Usually relatively small businesses, such as plumbers, decorators and hairdressers 
    • Sole traders typicallt work on their own, but it is possible that they might hire people
    • Requires high levels of discipline because there is no one checking up or offering guidance - although exciting, places a considerable emphasis on self-motivation 
    • Adv - relatively easy to start up and manage this form of business, freedom and control of decisions and actions and any profits made by the business goes to the owner and doesnt have to be shared 
    • DisAdv - lack of support on decisions and pressure/ responsibility if anything goes wrong, can be quite lonely, demanding hours and may not able to take time off, sole traders have unlimited liability and may find it difficult to raise finance to set up or expand 
  • Private limited companies - generally smaller than public limited companies 
    • Relatively cheap to set up
    • Benefit from limited liability - this means that the liability of shareholders is limited to the amount they invested in buying shares 
    • However, for some private limited companies, limited…


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