Chapter 4

• Sole trader

  A business that is managed by one person only
• Sole trader

  • It is one of the most common forms of business organizations as it doesn't have a lot of legal requirements needed to start
  • The owner needs to register and provide annual accounts to the government Tax Office
  • In some countries, the name of the Business must be written in the Registrar of Business names, and in other countries like the US, the owner simply needs to write the Business's name on all its documents and notify the main office to let them know who owns the Business
  • In specific industries, the sole trader needs to obey some laws that are also applied to other businesses in the same industry. Some of these laws contain health and safety laws, and acquiring a license. The license could be for example selling alcohol or driving a taxi
• Advantages of being a sole trader

  • Very few legal rules to obey when starting a business
  • You are your own boss, and you have the freedom to make your own decisions without needing the permission of anyone
  • You have confidentiality as you do not need to share the information about your business to anyone except the Tax Office
  • You don't need to share your profit with anyone
• Disadvantages of being a sole trader

  • The lack of assistance when needing to discuss important business matters
  • You don't have a lot of capacity to increase your capital
  • You are held responsible for any debts and losses that your business encounters
• Limited liability

  If you own shares in a company, you are only responsible for the money you put into the company, and you won't have to pay more than that if the company faces financial problems or debts
• Unlimited liability

  If your business can't pay its debts, your personal money and things, like savings or property, can be used to pay the debts. You're personally responsible for the business's debts beyond what you first put into it
• Partnership

  When two or more people agree to own and run a business together
• Partnership agreement

  A formal and written contract between business partners
• Advantages of Partnership

  • Partners may disagree with one another's decisions in the business which causes conflict
  • Each partner in the business has no legal independence
  • Limited capital access
  • Shared profits
• Private limited companies (Ltd.)

  Any type of business with private ownership where all shareholders have invested in the business and does not publicly trade shares
• Public limited companies (PLC)

  A business which is its own legal entity which is separate from the owners. It is also listed on the stock market
• Advantages of Public Limited companies

  • Capital can be used to expand the business; capital can also be used to pay off debts and the publicity increases popularity
• Disadvantages of Public Limited companies

  • Two directors are needed, tax deadlines are shorter for public companies and the more share-holders there are, the more power has been distributed