The Business Itself - The type of ownership that my business will have is a partnership.

Faheem Abdul-Haziz Business Coursework

The Business Itself

The type of ownership that my business will have is a partnership. A partnership is a contract drawn up between a group of people in which a company they have invested within. They would all be joint, equal owners of the business. In an ordinary partnership, the law says that there could be anything from 2-20 partners and all the partners should share equal responsibility towards the business excluding the sleeping partners. A sleeping partner is a partner who whilst owning a share of the business, is hardly or never involved in the day-to-day working of the business. Once joining the partnership, these sleeping partners provide the company with vital money that was needed in setting up the business. In the contract that is drawn up by a solicitor, it is written down that all the partners involved (excluding the sleeping partners) would share out equally all the responsibility involved in the day-to-day running of the business. These would be things like running costs, staff pay, etc.

To draw up the partnership contract, they would all have to go to a solicitor to draw up the legal contract, which would set out:

Who the partners are;
How much money each partner has to put in to set up the business;
How the profits are to be shared out;
During a partnership meeting, how many voted each partner should have;
What would happen is any partner would want to withdraw from the company or if there are any partners to be brought into the business.

The advantages of me joining a partnership for my business will be that I will be able to get together a lot of money to start the business. I won’t have to do all the work myself because all the responsibilities will be shared out and all the money being put it will also be equal. I came to these decisions because I researched and saw how much money you would have to have to set-up and run the business.

Other advantages for joining a partnership are:

The affairs of the business can be kept quiet because it will not be a public limited company and the only the tax authorities need to know how much money is being earned by the partners and how it is being spent as well as the profit of the business;
More partners may be willing to invest more money into the business and this would also be a way of financing expansion;
There could also be sleeping partners in the business. These are partners who whilst owning the business, do not take ...

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Other advantages for joining a partnership are:

The affairs of the business can be kept quiet because it will not be a public limited company and the only the tax authorities need to know how much money is being earned by the partners and how it is being spent as well as the profit of the business;
More partners may be willing to invest more money into the business and this would also be a way of financing expansion;
There could also be sleeping partners in the business. These are partners who whilst owning the business, do not take part in the day-to-day running and working of the business.

Disadvantages or constraints about this type of ownership I have chosen are:

When working together in the business, there may be partners who disagree on some things other partners agree on. This could cause a lot of difficulty in the business;
Voting rights within the business. Some may want more than others because they may feel more important;
If the partners begin to break up, the deed of the partnership will disintegrate because of disagreements amongst the partners.

The deed of a partnership is a legal contract, which governs how a partnership will be owned and organised

The other type of ownership I was considering before setting on starting a partnership was to become a sole-trader.

A Sole-trader is the owner of a business who has started up the business single-handedly and not relied upon a partnership to put or raise money together.

Advantages of being a sole-trader are:

The business will be easy to set up;
The owner of the business would be in complete control over the business and to make decisions and carry things out without consulting a partner or anybody else.
The profits of the business do not need to be shared out amongst partners, shareholders. This would also mean that, the harder the sole-trader would work, the more the business will be able to progress and more can be earned;
You would have a great deal of privacy in your business. Only the Inland Revenue and Customs and Excise would need to know what the sole-trader is doing financially. The business would not have to be discussed or asked questions about to the public or other businesses

Disadvantages of a sole-trader are:

You will have unlimited liability. Unlimited liability is when there is a legal obligation on the owners of a business to pay off their debts. There is no distinction between the assets and debts of a business by law so this could also mean that if the company was greatly in debt and the company was going under, all the debts and assets of a business as well as the personal assets and debts of the owner may also be lost;
Many sole-trader have to work a great deal to maintain their business to be financially secure as a whole so this would mean that long hours may have to be put in and more work will have to be done than expected;
There would be a problem if when starting the business you had insufficient funds so loans would have to be taken out and unlimited liability would come into place;
If the owner of the business was to have an illness then he/she may be forced to shut down the business because they won’t be able to run the business no longer. If the owner of the business did not survive, there wouldn’t be a guarantee that there would be someone there to run it for them unless it was sold to someone else or given to someone such as a relative. Or the business could stop and everything would then have to be sold off.

I choice not to become a sole-trader for my business because of the unlimited liability and if I had insufficient funds to start up my business I would not be able to start up the business because I would need a great amount of money to start up a fitness centre. I would also be in charge of everything meaning I would have to do all the works involving the business in order to keep the business running. If the business was not doing well and I was in great debt because of loans for example, all my business and personal assets and debts will be lost.

The other type of ownership I considered before settling on starting a partnership was to become a private limited company.

A private limited company is a company who is run by shareholders and traded upon in a stock market. A shareholder is an owner of the business.

Advantages of becoming a private limited company are:

There is a limited liability. This means that when the shareholders of the company are in debt and they would only lose up to a value of their shareholding;
Very easy to attract shareholders to invest more into the business because the company would have limited liability;
Asking shareholders rather than raising the funds single-handedly or taking out a loan may easily reach funds for company.

Disadvantages of becoming a private limited company are:

Information about the company will be open to the general public as well as other businesses;
You will not be running the business and you will not be able to make any decisions regarding the business. This is because the business will be run by the shareholders so you’d have to do whatever the shareholders has told you to do. You would be a manager of the business. A manager is a worker/s who are responsible for the day-to-day running of the business. The managers would then be answering to the director of the company rather than directly to the shareholders themselves. Some managers can also be directors and these are then called executive directors.

I chose not to become a private limited company because if I would be starting up a business, I would want to run it at the en of the day regardless of how much work its takes to make my business successful. Also, I wouldn’t want information about the business such as earnings or profit of the business to be disclosed to the public or other business or companies especially competitors.

My business is to be located in Balham. This is because there is very little competition in the area and I also done some background research into the area from a website where it told me there are a large amount of highly qualified executives living in this area. 81% of the people working work in the service sector and as they are very highly educated, there is over 4 times the proportion of people with degrees than average. There are also double the normal rates of students that live in the area and car ownership levels are lower than average. The people who do own cars in the area have new cars and company cars. The most important fact I found out was that keeping fit equipment was very high, as this will help me a great deal when doing my market research. Financially, there is double the average of people earning over £40,000 per annum which is also very good for my market research. The most popular newspaper read in the area is The Guardian. This will help me later on when advertising my company.

The objectives of my business short-term would be to start the business in partnership, to make a profit and most importantly to survive. Long-term objectives of my business would be to after making a sufficient mount of profit, to convert the company into a franchise and then to invest more money into the business for more branches. Profits would be shared out equally between the partners of the business.

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