Assessment
Tansy Addis STU34029
1a
when considering setting up an organisation there are a number of factors that should be considered. Depending on these factors will determine how your business will be set up, the three main types of business being Sole Traders, Partnerships and Limited Companies.
Sole Proprietors - This business is wholly owned by one person only and will usually be financed personally by the owner. As the business grows, the owner can employ personnel for different functions.
Advantages Easy start up Fewer legal formalities Owner takes all the profit
Disadvantages Owner shoulders all the financial risk Owner liable for tax Personal funds used for start up
Partnerships - This is similar to a Sole Trader with the difference being that the business is owned by two or more people.
Advantages
Potential for more capital to be raised at start up Financial risk is shared
Disadvantages
All profit is shared Dis-harmony when partners can not agree on decision making
In both cases of Partnerships and Sole Traders, the business is classidfied as ‘Unincorporated’ and all legal issues are conducted against the individual owners.
Limited Company - There are two types of limited company ‘Public’ and ‘Private’, the difference being that in the case of Public Limited Companies (PLC), shares can be sold through the stock exchange, Private Limited Companies can not.
When a company is classified as ‘Limited’, the capital of the company is divided into shares and this results in the financial risk being limited.
Advantages
Usually easier to source finance Professionally run by a board of directors Liability of owners is limited In the case of PLC, the owners can relinquish ownership by the selling of shares
Disadvantages
Expensive to start-up More legalities to consider Owners can lose control if large amounts of shares are bought by a 3rd party Stock exchange reporting us cumbersome
1.B
Finance Type
Period
Internal/External
Definition
Advantages
Disadvantages
Credit Card
Short Term
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