Forms of Business Organisation
1. Sole trader businesses are the easiest to set up because there is no complex paperwork. The business and the owner are the same person in law. The sole trader does not have limited liability which means that they are responsible for all the debts of the business. The sole trader has to produce an annual accounting return for the Inland Revenue.
2. Partnerships are set up by a Deed of Partnership which is a document made out by the partners and witnessed by a solicitor. This Deed sets out the legal relationship between partners e.g. how profits will be shared out, responsibilities of partners etc. In traditional partnerships the partners had unlimited liability i.e. they were jointly responsible for the debts of their partnership. In 2001 this has been altered so that some large partnerships e.g. accountancy firms can have limited liability.
3. Companies are separate in law from the individual owners (shareholders) of the business. This means that should the business run up debts the shareholders are only liable for these debts up to the sum they have contributed to the company. A number of Companies Acts have been passed setting out ways in which companies should conduct their affairs.
To register as a company various documents must be registered at Companies House in Cardiff including a Memorandum and Articles of Association setting out internal relationships within the company, and external relationships with third parties. A public company can only start trading and sell shares on the Stock Exchange once it has carried out all the required paperwork.
A private company does not sell its shares to the wider public. Shares can only be traded with the permission of the Board of Directors. In contrast, public company shares are generally available through the Stock Exchange. A private company will have Ltd after its name and a public company PLC.
Public companies are obliged in law to have an Annual General Meeting of shareholders. The Companies
2. Partnerships are set up by a Deed of Partnership which is a document made out by the partners and witnessed by a solicitor. This Deed sets out the legal relationship between partners e.g. how profits will be shared out, responsibilities of partners etc. In traditional partnerships the partners had unlimited liability i.e. they were jointly responsible for the debts of their partnership. In 2001 this has been altered so that some large partnerships e.g. accountancy firms can have limited liability.
3. Companies are separate in law from the individual owners (shareholders) of the business. This means that should the business run up debts the shareholders are only liable for these debts up to the sum they have contributed to the company. A number of Companies Acts have been passed setting out ways in which companies should conduct their affairs.
To register as a company various documents must be registered at Companies House in Cardiff including a Memorandum and Articles of Association setting out internal relationships within the company, and external relationships with third parties. A public company can only start trading and sell shares on the Stock Exchange once it has carried out all the required paperwork.
A private company does not sell its shares to the wider public. Shares can only be traded with the permission of the Board of Directors. In contrast, public company shares are generally available through the Stock Exchange. A private company will have Ltd after its name and a public company PLC.
Public companies are obliged in law to have an Annual General Meeting of shareholders. The Companies