Types of business organisations

• Sole trader is a business owned by a private individual.
• Advantages of a sole trader include having complete control over the business, not having to consult anyone before making decisions, and having close contact with customers.
• There is no close competition to the public corporation, there is a lack of incentive to increase consumer choice.
• Governments can use public corporations for political reasons, for example to create jobs just before an election.
• Disadvantages of being a sole trader include having no one to discuss matters with, not having the benefit of limited liability, and being fully responsible for the debts of the business.
• Sources of finance to a sole trader are limited to owner’s savings, profits made by the business, and small bank loans.
• Sole traders are suitable when setting up a new business, do not need much capital to get the business going, and will be dealing mainly with the public.
• Partnership is a form of business in which two or more people agree to join together to own a business.
• Advantages of a partnership include having more capital invested into the business from personal savings, sharing responsibilities, and being motivated to work hard because both partners benefit from profits.
• Disadvantages of a partnership include not having limited liability, the business not having a separate legal identity, and ending if one of the partners dies.
• An unincorporated business is one that does not have separate legal identity.
• A public corporation is a business that was originally a private sector business but has been nationalised to be owned by the state, offering limited liability but with no private shareholders to insist on high profits and efficiency.
• A joint venture is when two or more businesses start a new project together sharing risks, capital and profit, but if the new project is successful, the profits have to be shared with the joint venture partners.
• Some public limited companies grow so large they become difficult to manage and control, making the legal formalities of forming such a company quite complicated and time consuming.
• A public limited company offers the opportunity to raise very large sums of capital to invest back into the business, but it cannot raise large sums of capital due to the limit on the number of shareholders.
• A public limited company offers limited liability, but it has no restriction on the buying, selling and transfer of shares.
• A private limited company can raise large sums of capital to invest back into the business, but it may be difficult to sell shares quickly if required investment back.
• A franchise is a business based upon the use of the brand names, promotional logos and trading methods of an existing successful business, where the franchisee buys the licence to operate this business from the franchisor.
• Selling shares to the public is expensive for a public limited company, often leading the directors to ask a specialist merchant bank to help them in the process.
• Advantages of a private limited company include all shareholders having a limited liability, the company not being forced to sell the shareholders' possessions to pay debts, and the people who started the company being able to keep control of the company as long as they do not sell too many shares to people.
• Disadvantages of a private limited company include the shares not being able to be sold or transferred to anyone without the agreement of other shareholders.