Introduction
There are many types of organisational structure a business may decide to adopt. This assignment will examine the four main different business structures and present the advantages and disadvantages of each one. The business structures that I will be examining are as follows:
The Sole Trader
The partnership
The Private Limited Company (LTD)
The Public Limited Company (PLC)
Sole trader
A sole trader is an organisation, which is owned by one person. The assets and liabilities of the owner and those of the business are the same. There are no legal or tax distinctions between the owner and business.
This type of business is straightforward to set up and dissolve. It requires the minimal legal requirements and costs. The
…show more content…
There are no additional funds available from equity investment by persons outside the business (third parties). This therefore, limits the businesses’ growth potential. The transfer of ownership is not very flexible and the owner can only sell assets. All of the profits from the business are taxes as personal income, whether they have been retained within the business or taken out. Although self-employment reduces the National Insurance contributions payable, it also reduces the benefits of the National Insurance entitlements. The tax relief on pension contributions is restricted. If any property is transferred to the spouse it is lost to the sole trader if the marriage breaks and the spouse refuses to give it up. If the owner dies, the business comes to an end and the executives in charge of his affairs either sell it as a going concern or sell the assets individually.
Partnership
This is easy to set up and dissolve. There are no legal requirements to audit the accounts. No public access to the accounts ensures confidentiality. Any business losses can be offset against other income. Can be converted to a limited company at a later stage. Benefits of self-employment for income tax and National Insurance. Can attract more capital by admitting new partners, however, each partner has the right to veto the introduction of the new partner. Can get credit easily because supplies are not at risk as it is the partners who are taking the risks. A
Sole proprietorship is a type of business owned, managed, and operated by a single individual. Company profits are treated just like the owner’s income, and any money owed by the company incurs are considered to be the owner’s personal debts. One advantage of a sole proprietorship is that compared to the other forms of ownership, there are minimal cost and paper work involved with forming it (Kelly & Williams 2017). It’s an advantage for entrepreneurs who are ready to start a business. The owner has complete control of the business and can operate it how he or she chooses. Another advantage of a sole proprietorship is the owner has a feeling of pride ant personal satisfaction. There are not many legal requirements for a sole proprietorship company to operate. Low monitoring charges among the investors gives the company the ability to make on the spot decisions (Baik, Lee &Lee 2015). Another reason the sole proprietorship company has an advantage is that there is a low chance of being threating by competitors.
· Probably the disadvantage of a sole trader company is the fact that it will have ‘unlimited liability’. This means the owner is personally responsible for anything that goes wrong. The owner could have their car or house taken away, this is why some businessmen with sole trader companies put there house in their wives name.
The sole proprietorship is the simplest form of “business association” we will examine. It is perhaps a bit odd to describe it as a form of “association” given that the “sole” proprietor will be the only “equity” investor and thus doesn’t “associate” with anyone else as a co-equity investor. However, there will almost invariably be “associations” that the sole proprietor will have in order to carry on the business. These can include associations with employees, agents, lenders (such as a bank) and trade creditors. This chapter looks at the structure of the sole proprietorship, its formation, legal status, name registration requirements, funding, management, and dissolution. It also
A sole trader is a business owned by 1 person. It does not have limited liability meaning that if it fails and creates debts the owner is personally responsible for this.
Being as a sole trader, you are able to retain complete control over your business. As there is no division between business assets or personal assets, which includes your share of any assets jointly owned with another person (such as your house or car). Your liability is unlimited which means that personal assets can be liable for any business debts.
Limited partnership is similar to General partnership; the main difference is that each partner is only liable for the percent or amount of money that they have invested into the business. These limited partners don’t have the same day to day responsibilities of a General partner. Some of the advantages may include; the limited partners get a portion of profits, they can leave and not have to worry about the dissolution of the business, and replacing a limited partner is very easy to handle. Some disadvantages may include; if the business is being sued or is having legal problems or facing debt, the responsibility if only with the general partners, the limited partners are not held liable (Allbusiness.com, 2011).
SOLE PROPRIETORSHIP: It is an unincorporated business with one owner who pays personal income tax on profits from the business. With little government regulation, they are the simplest business to set up or take apart, making them popular among individual self contractors or business owners. The benefit of the sole proprietorship is the tax advantage. The disadvantage of a sole proprietorship is obtaining capital funding.
A sole trader has the power to make decisions within the business whenever he or she feels it’s necessary but the sole trader only answers to him/herself.
A sole trader is an individual owner of a business. There is a risk vs reward system in place with sole trader as they reap all rewards in the form of revenue and profits but is also entirely liable for all the losses in the business.
They retain all responsibilities to the survival of operating their sole proprietorship business structure, however. So in doing this, they possibly face personal bankruptcy in the event that the small business fails. An advantage, though, includes an easier transition of sale the small business if an owner decides to sale, or in the event the owner passes away because it is uncommon for a small business to outlive an owner unless passed down through usually family or someone close with the same passion or
A sole trader is a person, who runs his or her own business, he is
The type of business structure that the start-up company will decide to use will depend on a number of unique factors. This section of the document will highlight the various options available in terms of business structure and highlight the advantages and disadvantages of each one.
The characteristics that are the greatest advantages to this type of business are its freedoms. A sole proprietorship has complete control and decision-making power over the business. There are no corporate tax payments and profits are not shared; however income and losses are taxed on the individual's personal income tax return.
There are a number of business structure depends on the size and type of the business. In Australia, there are four main structures: sole trader, partnership, corporation/ company and trust. This particular discussion will focus on the advantages and disadvantages of using partnership and corporation the business structures.
Also, a sole proprietorship has some cons; liability, the owner of the sole proprietorship has direct personal responsibility for the business expenses, debts and general liability; financing, as the individual owner credit and score is used to apply for financing it might be difficult to obtain additional financing for the business; continuity, the sole proprietorship exists as long as the owner wishes, upon death it ceases to exist.