Main Types of Business Ownership

Different types of ownership of business ranging from the simple to the

complex. Here I will cover the main types, outlining the advantages and

disadvantages of each leading to a decision on which type of ownership

is most appropriate for my business.

Types of ownership

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There are many different types of ownership of business ranging from

the simple to the complex. Here I will cover the main types, outlining

the advantages and disadvantages of each leading to a decision on

which type of ownership is most appropriate for my business.

Sole Proprietors

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A sole proprietor, or sole trader, is the name given to someone who

runs the business by themselves. This is usually someone who is

particularly skilled in one area or had a very good and marketable

idea. There are many advantages and disadvantages to setting up a sole

proprietorship.

Advantages

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Sole proprietorships often require less capital to start up than the

bigger businesses. This is because they are usually smaller and have

less staff to start with. This cost is minimal and often only a few

hundred pounds.

Sole proprietorships are easy to set up, few forms and licenses need

to be obtained and the business can start almost straight away,

resulting in less time being unemployed. The only official form you

need to fill in is a inland revenue form for use when calculating

income tax, it also entitles you to many tax advantages outlined

later. Of course you need to write a business plan, complete with

cashflow forecasts etc but this was it.

These businesses are easy to maintain and run. This is because the

owner has little or no oppositon for her ideas and plans. Also, it is

possible for the owner to act as their own accountant, saving them

lots of money.

The owner has an increased level of control, they have the rite to

change the business whenever they feel like it and have the advantage

of not having to call shareholder meetings.

One of the largest advantages is the allocation of profits. Unlike

larger companies sole proprietorships don't need to distribute profit

amongst it's shareholders. All profit goes directly to the owner, who

does with it as he or she sees fit.

Because of the owner's status as a sole trader, she does not need to

publish her accounts. Therefore she can keep her business priv...

... middle of paper ...

...large amounts of debt then the owners

would not be obliged to pay off any of that personally. This is a big

bonus to the company as it is much easier to attract potential

investors who are not willing to risk unlimited liability. These are

the main advantages of becoming a limited company, and while they

don't seem much they are actually a huge bonus.

Disadvantages

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A limited company has to display information to the public at the end

of every fiscal year. Some companies may not want so much information

released. It can also be fairly expensive, costing a minimum of £700 a

year to prepare a report.

Complying with the rules of the London stock exchange is also a big

disadvantage to any limited company and very costly. However companies

can list themselves in the alternative investment market (AIM). This

is quite a lot cheaper but is seen as more risky by prospective

employers. This can make it quite hard for a business to attract new

shareholders.

Suitability

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Overall I think this is the most suitable choice for my business. This

way I am likely to attract more investors plus I would not have to

suffer from unlimited liability.