NICOLA BUXTON

Ownership of firms

1.        Two reasons why almost half of the businesses in the UK are owned by sole proprietors are:

  • They are very easy to set up.
  • When a profit is made by the business, the profit automatically belongs to the owner. This is a big advantage and appeals to many people thinking of opening their own business.

2.        Businesses owned by sole traders often fail. There are several reasons why this may occur. Some of them are as follows:

  • The business may get into debt and therefore result in personal loss to the owner of the company.
  • They may not like the long hours and hard work that they have to do. They may find it difficult to work long hours and take care of families as well.
  • They may need to take long-term sick leave but die to giving to one else to be able to run the business, the business is likely to fail.
  • The owner may not be able to afford to keep up with the re-payments that they may owe to the bank etc, and because they are sole traders, they have unlimited liability for their loss.
  • The business may fail due to no economies of scale – for a business, it is cheaper for them to buy their stock in bulk. This means that they can also sell cheaper because they are buying cheaper. If they can’t buy in bulk, they can’t sell cheaper stock.
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3.        There are many advantages to registering a company as a limited company. One main reason may be that they have a limited loss. This means that if the company goes bankrupt or gets into debt, they will not lose their personal belongings.

4.        Private Limited Company - This is a type of joint-stock company (that is, it is an incorporated business – where the business has a separate legal identity from the owners). Often private limited companies are small, family run businesses which are owned by shareholders. Each shareholder in a private limited company MUST be a part of ...

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