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Types of Business and ownership.

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Introduction

Type of Business There are different methods of classifying a business and one method is by sector. Businesses have traditionally been split in to two sectors, public and private sector. Public sector This sector comprises government owned or government controlled bodies including: * Public corporations as the Post office * Government departments * Local authorities such as the police and fire dep. Private sector This sector comprises businesses that are directly or indirectly in private ownership. This sector accounts for most businesses operating within the UK. Private sector businesses include: * Sole traders (one person businesses) * Partnerships (groups of people in a business) * Co-operatives (groups of people 'clubbing' together for a specific purpose e.g. A farmers co-operative set up for producing and selling grain) * Franchise operations (where a trader can 'buy' a name and set up a bushiness which is already established and used by other independent operators) * Limited companies (a limited company is a body owned by shareholders set up to do business. The Bank of Cyprus (London) ...read more.

Middle

Limited companies are run by directors who are appointed by the shareholders. The board of directors, headed by a chairperson, is accountable to shareholders and should run the company as the shareholders wish. If the company's performance does not live up to shareholders' expectations, directors can be 'voted out' at an Annual General Meeting. Whereas sole traders and partnerships pay income tax on profits, companies pay corporation tax. A limited company will either be: * A public limited company (Plc), or * A private limited company (Ltd Public limited companies (Plc) This type of limited company tends to be larger than a private limited company. There are around 500,000 limited companies in the UK but only 3% are Plc's. However, they contribute far more to national output and employ far more people than (Ltd) companies. The main difference between a PLC and a private limited company is that a PLC can sell its shares on the Stock Exchange to members of the general public and can, therefore, raise significantly more finance than a private limited company. ...read more.

Conclusion

Advantages: * Shareholders have limited liability. As a result more people are prepared to risk their money than in a partnership, for example. * More capital can be raised as there is no limit on the number of shareholders * Control of the company cannot be lost to outsiders. Shares can only be sold to new members if all shareholders agree. * The business will continue even if one of the owners dies. In this case shares will be transferred to another owner. Disadvantages: * Profits have to be shared out amongst a much larger number of members. * There is a legal procedure to set up a business. This takes time and also coasts money. * Firms are not allowed to sell shares to the public. This restricts the amount of capital that can be raised. * Financial information filed with the Registrar can be inspired by any member of the public. Competitors could use this to their advantage. * If one shareholder decides to sell shares it may take time to find a buyer. ...read more.

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