types of business

Sole trader –
Definition: A sole trader is a company started and run by one individual

A sole trader - also known as a sole proprietorship or simply proprietorship - is a type of business entity which is owned and run by one individual and where there is no legal distinction between the owner and the business.

Sole trading is widespread-
A very large proportion of business conducted in the UK is undertaken by the trader working on his own usually providing his own money (capital) to start the business.

The liability of any debts of the business will be down to him. In such a business there will probably be only one person doing this. He would normally deal with the day-to-day bookkeeping and then hand over the records to an accountant who will prepare the final end of year accounts and compute the tax due.

This means that the owner has unlimited liability. It is a "sole" proprietorship in the sense that the owner has no partners. A sole proprietor may do business with a trade name other than his or her legal name. This also allows the proprietor to open a business account with banking institutions.

Partnership-
Definition: A partnership is defined as two or more persons in business with a view to making profits; the number is usually limited to a maximum of 20.

In a partnership, the partners provide the capital and share the responsibility of running the business on agreement between its members.

Partnerships are common in the same services provided by sole traders but a partnership would have the advantage of being able to raise more money because each partner could make a financial contribution. The liability for any debts of the business would be the partners.

Tax advantage of partnerships
Partnerships are often favored over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is distributed to the partners.

However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation.

Partnerships in economic In the economic Online Accounting system default account setups exist for various types of companies including Partnerships with and without VAT. Hereby the chart of accounts and other system features are automatically set up for you ready to be tailored to your needs.
Private limited company’s

Definition: Limited companies exist in their own right, meaning that the company's finances are separate from the personal finances of their owners

A private limited company, although having no limit to the number of shareholders it can have, may only sell its shares privately and it is therefore restricted in the amount of capital it can raise. In contrast, the public limited company can invite the public to buy its shares and therefore has the greater potential to raise the most capital.

Shareholders of both private and public companies are part owners of their companies, Limited companies having the advantage of having restricted liability for the debts for the company.

Shareholders are not personally responsible for the company's debts, but directors may be asked to give personal guarantees of loans to the company.

Private or public limited companies-
•Private limited companies can have one or more members, eg shareholders. They cannot offer shares to the public.
•Public limited companies (plcs) must have at least two shareholders and must have issued shares to the public to a value of at least £50,000 before it can trade. Set-up of a Limited Company-
•Must be registered (incorporated) at Companies House.
•Must have at least one director (two if it's a plc) who may also be shareholders. Directors must be at least 16 years of age. At least one director must be a person.
•Private companies are not obliged to appoint a company secretary but if one is appointed this must be notified to Companies House.
•Public limited companies must have a qualified company secretary. Records and accounts
Accounts must be filed with Companies House before the time allowed for filing those accounts to avoid a late filing penalty, and accounts must be audited each year unless the company is exempt.
When you file your Annual Return for the first time a letter will be issued to the Registered Office containing the company's authentication code and instructions for use of Companies House web filing services. Please follow the instructions in the letter.

Directors are responsible for notifying Companies House of changes in the structure and management of the business.

Profits are usually distributed to shareholders in the form of dividends, apart from profits retained in the business as working capital.
Corporation tax

If a company has any taxable income or profits, it must tell HM Revenue & Customs (HMRC) that it exists and is liable to corporation tax. Companies liable to corporation tax must make an annual return to HMRC.

Company directors are employees of the company and must pay both income tax and Class 1 National Insurance contributions on their salaries.

Franchises
Definition: franchising occurs when the owner of a business (the franchisor) grants a license to another person or business to use their business idea - often in a specific geographical area.

A parent company (franchisor) allows entrepreneurs (franchisees) to use their company's business model, brand, strategies and trademarks and in return the franchisee pays an initial fee and continuing royalties based on their revenue.

The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement.

The franchising model therefore provides benefits to both the franchisor and the franchisee.
Benefits for the franchisor
Creating franchises can be a good alternative to building 'chain stores'. Franchises allow a company to distribute their goods in many locations while at the same time avoid large investments and liability over their chain stores.

Franchising provides companies with a faster, cheaper form of expansion, because it costs the parent company far less when new branches are owned and operated by a third party.

There are two payments initially made to a franchisor:
•A royalty fee for the use of the trade-mark
•Compensation for training and any other services given to the franchisee Though franchising has many benefits for franchisors, the potential for revenue growth is more limited because the parent company will only earn a percentage of the earnings from each new store.

Benefits for the franchisee
Franchising offers franchisees the advantage of starting up a company quickly based on a proven trademark, and is provided with the tools and infrastructure to succeed as opposed to having to develop them. The franchisee has a greater incentive than a direct employee of the franchisor because they hold a direct stake in the business.

Types of franchises
There are product franchises – e.g. Chanel and other cosmetics – but most commonly frachises are created for service firms - e.g. restaurants, convenience stores, etc. Some of the most famous chains include McDonalds and Subway, among others.
Businesses for which franchising works best have the following characteristics:
•Businesses with a good track record of profitability
•Businesses which are easily duplicated

Public sector organisations

Public Sector Organisations

The public sector refers to all the businesses and organisations which are accountable to central or local government. They are funded directly by the government and they tend to supply public services rather than produce products for a profit.

The public sector provides 3 types of good / service.
•A public good is one which would not be provided by private sector businesses because it would not be profitable to do so (such as the emergency services and the armed services).
•A merit good is one which the government feel that everyone should have, whether or not they could afford them in the private sector (such as education and healthcare).
•Essential services (such as street lighting, refuse collection, street cleaning, parks, libraries, swimming pools, etc.).

A public corporation is the term used to describe a nationalised industry which is providing a good or a service to the general public. Until the successive Conservative governments of Thatcher and Major (1979-1997), there were many public corporations in the UK providing a huge range of services to consumers. However, the Conservatives sold many of these public corporations to the private sector - this process is known as privatisation.

Central government pays for the public goods and merit goods through taxation (e.g. Income Tax), whereas local governments pay for the services they provide through Council Tax (formerly Community Charge and, before that, through Rates).