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Private sector businesses.

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Private Sector Businesses Sole Traders Sole traders are the smallest type of enterprise. This type of business is owned by one person, although he or she may employ other people to work in the business, he has complete control over the business and takes home all the profits. A sole trader is someone who decides to own and run his or her own business and most probably uses her own saving as capital to start it up. This type of business is easy to set up and there are no formal procedures to follow. Advantages: * If the firm is successful then the owners reward is the profit. * Ideally suited for offering a personal service to customers. * Bad (unpaid) debts can be avoided as the customers are usually known to the owner and most transactions are usually for cash rather than credit. * The sole trader can be flexible as to which days to work and working/opening hours. * Unlimited liability means a lot less paper work because they don't have to pay corporation tax. Disadvantages: * Long working hours. * Illness and sickness can cause problems to the business - when closed it makes no money. ...read more.


Instead the company goes into liquidation. So anyone who lends money or sells goods on credit should check that the business they are dealing with is financially sound. 2. Provide a better image to their customers, who are likely to assume the business is well established and more secure (whether it is or not!). A private limited company issues share to its owners. Each share represents a share of the company and each share equals one vote. Therefore a shareholder with more than half of the shares can out vote the other shareholders. For this reason, the proportions held are often carefully thought out. Advantages: * The business can still stay small - many private limited companies have only three or four shareholders (the minimum is one director and one shareholder - there is no upper limit to the number of shareholders). * The owners or shareholders usually work in the business everyday and have a vested interest in its success. * The shareholders are often directors also - and responsible for the running of the business. * It is relatively easy to start up a private company. In some cases the owners may only invest �100 or �200 each to start with. ...read more.


* An annual general meeting (AGM) must be held each year and all shareholders must be invited. Shareholders who do not agree with the way the company is managed may raise objections or vote against a proposal made by the directors. * Specific account must be prepared each year and these must be audited. Moreover, the accounts must be published so a 'problem year' cannot be hidden. * Shareholders will expect to receive a dividend for their investment. They will also want their shares to increase in value. If the company has a poor year or if the stock market performs poorly and the shares fall in value, the shareholders will be tempted to sell, further depressing (lowering) the price. This makes the company vulnerable to a take-over bid as it is then relatively 'cheap' to buy. * The shareholders may have little interest in the long term prospects of the company and simply be interested in quick returns on their investment. In these cases their interests are different to those of the directors, who may be looking at the long term security of the company. * The original owner(s) may lose most of their control over the company, even if they retain a substantial number of shares. Sir Richard Branson bought his company back from public ownership because of this! By Laurence Osborne ...read more.

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