Friday, August 16, 2019
Different Types of Business
1. Sole trader ââ¬â the oldest form of trading there is, itââ¬â¢s also the simplest and the most common type of business youââ¬â¢ll find. The clue is in the name ââ¬â meaning that you are solely responsible for everything the business does and youââ¬â¢re often known as the proprietor. This is the usual form for small shops and businesses that provide services such as beauticians, hairdressers, photographers, gardeners and so on. When you start out in business, most often you use your own money to fund the venture. However, as you start to grow, you may need to find funding elsewhere. When this happens you may want or need to enter into another kind of business model: 2. Partnership ââ¬â these are made up of two or more people and any profits, debts and decisions related to the business are a shared responsibility. These are common for practices that offer services such as accountants, dentists, doctors, solicitors and so on. 3. Company ââ¬â the correct name for this is a joint stock company and itââ¬â¢s made up of a number of people who put their money together to form a ââ¬Ëjoint stockââ¬â¢ of capital. These people are more commonly known as shareholders and, as the name suggests, they each own a share of the business and each expect a share of the profits too. Each shareholder puts money into the company and receives a portion of the company ââ¬â shares ââ¬â equivalent to what they put in. Despite each shareholder owning a piece of the company, in law it is seen as a legal entity ââ¬â the same as an individual ââ¬â that is entirely separate from the shareholders or members, as they are sometimes known. It can be sued, make a profit or loss, be held responsible for its employeesââ¬â¢ actions and go into liquidation ââ¬â the term used for companies that go bankrupt. Private Limited Companies Most small businesses are private limited companies with the shares only available privately, for example, to family members. The shares are not available to buy publically so they cannot be traded on the stock market. Public Limited Companies Being a Public Limited Company (PLC) is much more complex and is usually reserved for larger companies. To be called a PLC a company must have, amongst other things, more than one director and a trading certificate from Companies House. PLCs can sell their shares on the stock market so anyone can buy them. Whilst it is easier to raise money using this method it also means that the company accounts are in the public domain. The company must also be audited and make certain information available to Companies House. Plus, PLCs can be bought out by other shareholders. 4. Franchises A franchise involves you using another companyââ¬â¢s successful business model to create your own shop, restaurant etc. Essentially, you buy the franchise and trade off the good name of the company youââ¬â¢ve bought into. For example Subway ââ¬â youââ¬â¢d find a suitable location, Subway would provide you with their livery, food products and use of trademark. You make money because customers are already familiar with Subway; so you have an instant customer base. Franchises are for a fixed period of time ââ¬â from five to 35 years ââ¬â and cover a certain location known as a ââ¬Ëterritoryââ¬â¢. Youââ¬â¢ll have to pay fees to the franchisor: royalties for using the trademark ees for the training and advice received There are specific and complex laws relating to franchise contracts so entering into one is something that needs to be thought about very carefully. 5. Workers Co-operatives This is a truly egalitarian form of business that is formed to meet the mutual needs of the workers. Each person ââ¬â from the managing director to the shop floor assistant ââ¬â is equal ly important. All decisions are taken democratically and any profits are shared equally or ploughed back into the business. Co-operatives follow seven guiding principles: Voluntary and open membership Democratic control Member economic participation (financial interest) Autonomy and independence Education, training and information Co-operation among co-operatives Concern for the community http://www. ica. coop/coop/principles. html This should give you a pretty good idea of the ethical and moral stance of a co-operative. 6. Limited Liability Partnerships (LLPs) LLPs are a relatively new form of business as theyââ¬â¢ve only been around since 2001. They are intended to benefit professional partnerships such as lawyers, accountants and the like, who are restricted from forming limited companies due to restrictions from their professional bodies. LLPs operate in much the same way as limited partnerships and allow the members to limit their personal liability if something goes wrong with the business. So, as you can see, businesses can be simple or complex but, once you know what all the terminology means, you should find it quite easy to decide which kind of business structure will best suit your needs.
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