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Types of Business Structures.

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Types of Business Structures Sole Trader Sole trader is the term used for a "one-person" business with or without employees. This type of structure has the following characteristics: * You do not need to register the business; * It is the "default" business structure i.e. if you are working by yourself and do not take action to set up another type of business, you will be deemed to be a sole trader; * For tax and National Insurance purposes, you are self-employed i.e. any profits, including wages drawn, are taxed at personal tax rates; * You are personally liable for all your business debts; if your business fails, both business and personal assets i.e. house, car, furniture etc, will be used to pay off the debts; * If you use a name for business different from your own, you must show your name and address as proprietor on all business stationery and in a prominent place your business premises. Sole Trader - plumber, beautician, market trader, dress designer, "corner shop" proprietor, taxi driver, photographer and musicians; Sole Trader Advantages: i) no need for registration; ii) inexpensive; iii) no need for accounts to be audited; iv) lower National Insurance contributions; v) losses can be offset against future profits or other income; vi) tax treatment of capital gains is better than for a limited company. Disadvantages: i) personally liable for all business debts; ii) ...read more.


already "formed" in the legal sense via a solicitor. * A Public Limited Company (PLC) is a limited company with at least �50,000 in share capital, which has decided to call itself PLC. N.B. it does not need to be quoted on stock market; * A company limited by guarantee has no shares; instead each member guarantees to pay up to a pre-set amount (usually �1.00) in the event of the company ceasing to trade. As there are no shares, profits cannot be disputed except by payment to employees. This structure is best suited to non-profit organisations such as clubs and associations; * A limited partnership allows partners to admit one more "limited partners" who are liable only up to the amount of capital which they subscribe but cannot take part in the management of the business. Very rare because it does not offer many advantages over a limited company; * An unlimited company is one in which a shareholder may be required to meet the liabilities of the company on liquidation. The only advantage is that the company does not have to publish annual accounts. Again this structure is very rarely used. Limited Company Advantages: i) shareholders have limited liability; ii) may give a more professional image, and more credibility with creditors, lenders and investors; iii) "perpetual succession" i.e. changes in shareholders do not affect continuity of company; iv) ...read more.


e. Have a minimum profit level. f. Accept full disclosure on its operations - salaries, profits and strategies. This is the reason why some businesses are reluctant to go public. 2. The legal documents that must be lodged with the Registrar are: a. Memorandum of Association as well as the other contents of the memo mentioned previously. b. Articles of Association - contents mentioned previously. c. A formal declaration of compliance with the Companies Acts. d. A statement denoting the amount of authorised or nominal share capital of the company. e. A list of agreed directors. f. Directors' written consent to become directors. 3. Company makes application to Stock Exchange through a stockbroker where shares are quoted. 4. The company employs a merchant banker, and the stockbroker and the merchant banker together inspect the books of the company: a. To verify that the books meet the Stock Exchange Council's requirements regarding the financial state of the company. b. To verify the healthy future prospects of the company. 5. When the Stock Exchange accepts the company's application to trade on the Stock Exchange, the Registrar of Companies issues the company with a trading certificate. 6. Before shares are quoted on the Stock Exchange, the company must produce a prospectus after receiving the trading certificate (the birth cert. of the public limited company). 7. Once the Trading Certificate has been received and the Prospectus has been organised, the company can now commence trading on the Stock Exchange, quoting the shares of the company, and can place plc after its trade name. Navinder Kaur Khaira 12T ...read more.

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