The Formation, Management and Dissolution of Business Enterprises

Topics: Corporation, Limited company, Types of companies Pages: 6 (1733 words) Published: April 30, 2014
The Formation, Management and Dissolution of Business Enterprises

Type of business organizations
Sole Trader it is any business which is owned by one person. This person may recruit employee. Owner is personally responsible for the debts the company and he has unlimited liability. These are such people who testify specialized services such as hairdressers, plumbers or photographers. Partnership it is business that is owned by two or more people. These people put jointly in the business their money, skills and other resources. They separated the profits and losses among themselves according to the signed contract or proportionately. Limited Companies meaning that the owners are not personally responsible for the company's finance and any debts, they have limited liability. We have two types of limited companies: Public Limited Company (PLC) may have an unlimited number of shareholders and offers their shares on the stock exchange. It can be bought and sold by everyone. This company must have a minimum share capital in the amount of £50,000. Private Limited Company (LTD) is usually set up by family or friends, they can’t sell their shares to the public. They may only sell their shares privately.

Advantages and disadvantages business organizations
Sole Trader
Advantages
small companies, which are quick and easy to set up
requires little capital
easy to maintain control over it, the owner can quickly and independently make decisions Disadvantages
do not have anyone to share responsibility for business
owner mostly have to work hard and there is no one to replace him during illness or holiday unlimited liability

Partnership
Advantages
the more partners means the more money and thus greater opportunity to develop and profit partners sharing the responsibility for business. They undertake joint decisions and help each other. Therefore, as is their more they can have more ideas for conducting business and also for solving problems. Easy to set up and manage, because they are not as strictly regulated as companies and they are very flexible in terms of management. Disadvantages

disagreements between the partners, different ideas about running a business, which may harm business and the relationship between partners generally has unlimited liability - each of the partners have responsibility for the company and any debt, however, there is the possibility of creating a partnership with limited liability (LLP) partners sharing the profits, which can lead to injustice, when one works hard and the other not and despite this he gets an equal share However, there is the possibility of creating a partnership with limited liability

Public Limited Company
Advantages
limited liability
the company may increase capital through sale of larger quantities of shares and debentures, there is no limit to the amount of shareholders shares are transferable without limitation
separate legal entity - even if one of the shareholders dies business is continues Disadvantages
many legal formalities, company formation is very expensive and requires a lot of time strictly control of the company in order to protect the interest of shareholders large size of the Company, which creates problems with the management of the company like for example the slow decision-making profits are shared between a huge number of people

Private Limited Company
Advantages
limited Liability
easy to raise capital from financial institutions
only need two shareholders to start business
possibility to increase the capital by increasing the number of shareholders (up to 50) Disadvantages
many procedures, formalities and high costs to start a business profit sharing
not able to sell or transfer their shares to the general public shares can’t be sold without the approval of the other shareholders

Formal legal requirements
Sole trader business is very easy to create, there are no complicated formalities because the business and the owner...
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