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
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.
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
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
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.
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
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.
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