Types of business

Types of business

1. sole trader

   • Laws governing set-up
     • no laws
   • Number of owners
     • owned by 1 person
   • Legal entity
     • Owner and business seen as the same
   • Accounting entity
     • Business and owners financial records to be kept seperate
   • Profits distribution
     • Drawings
   • Liability of owners
     • unlimited liability- owner is liable for all business debts
   • Life of business
     • life of business is limited to length of time owner operates it
   • Business operators
     • Owner
   • Name of owner
     • Owner

2. partnership

   • Laws governing set-up
     • Partnership Act 1908
     • Limited Partnership Act 2008
   • Number of owners
     • 2-25 people
       • Up to 125 for certain partnerships
   • Name of owners
     • Partners
   • Business operators
     • Partners
   • Legal entity
     • Partners & business seen as the same
   • Accounting entity
     • Business & partners' financial records to be kept seperate
   • Liability of owners
     • Unlimited - partners are liable for all business debts
     • Limited - only liable if their investment if unpaid
   • Life of business
     • Limited - dissolves if a partner leaves or dies unless an agreement states otherwise
   • Profits distribution
     • Drawings

3. company

   • Laws governing set-up
     • Companies Act 1993
   • Business operators
     • Board of directors & managers - depends on size of business
   • Number of owners
     • Minimum: -1 person. -1 shareholder. -1 director.
   • Profits distribution
     • Dividends
   • Liability of owners
     • Limited - shareholders only liable for value of unpaid shares (unless personally guaranteed as a debt)
   • Life of business
     • Indefinite for as long as it is financially viable and people want to operate it
   • Legal entity
     • Shareholders seen as separate from the company
   • Accounting entitty
     • Business and shareholders' financial records to be kept separate
   • Name of owners
     • Shareholders