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Different types of business organisation recognised in the English Legal System.

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Introduction

Building Law Assessment 1 26-4624-00S Introduction There are various different types of business organisation recognised in the English Legal System. There are four organisations that I will explain during this assessment. These are the sole trader, partnerships, private limited companies and public limited companies. A sole trader is a single individual who sets up a business, the identity of which is indistinguishable from that of its owner. Partnerships consist of two or more persons, usually with a maximum number of twenty. A Private Limited Company is usually family run and the owners have different liability to the other forms of business organisation mentioned previously. This will be explained later. The owners of a Public Limited Company (PLC) have the same liability as limited companies with the major difference being that a PLC company is open for public investment. These are not the only forms of business organisation. There are also co-operative companies, charities, building societies and other forms of organisation. In this assessment I will focus on the main four organisations briefly mentioned previously. Various Forms of Business Organisation Business Organisations are most commonly classed in terms of the size, the type of ownership (public, private etc), legal form (sole trader, limited company) and the industry sector. ...read more.

Middle

One of the main disadvantages of a partnership is again unlimited personal liability for the debts of the business. Furthermore, each partner has personal liability of the mistakes made by other partners, which brings about a second disadvantage of shared responsibility that can also be looked at as an advantage. There will be many disputes over various decisions that have to be made or about the effort that one partner is putting into the company compared to another. The deed of partnership will state the distribution of profit amongst the partners but if one individual feels that one of the partners is not putting in as much work to the company as another then there will be disputes over the profit distribution. A further complication of a partnership is the distribution of assets if the company was to fail or if one of the partners was to leave the partnership at all. The deed of partnership would explain their share in the company but would not explain which assets are which partners. The main advantage of a partnership over a sole trader is shared responsibility, which allows for specialisation, where one persons expertise can complement another. There will be more people contributing capital into the company, which allows more flexibility in the company and allows further scope for expansion due to banks being more willing to lend money. ...read more.

Conclusion

This may not always be considered an advantage due to the public being able to access their financial information and previous performance figures e.g. www.bloomberg.com, which may alter their interest to invest in the company or buy the companies products. Another major disadvantage of a public limited company is the amount of capital and number of directors it has to have before it can obtain a business certificate from the Registrar of companies. This is time consuming and some companies may not have the correct amount of capital in their company to be able to register. Conclusion It is difficult to define an ideal business organisation due to all having their advantages and disadvantages. The choice of a business organisation usually depends on its size, ownership, legal form and the industry sector. Small companies such as hairdressers tend to run by sole traders, larger firms such as solicitors, dentists etc, tend to be run by more than two individuals in a partnership due to the increased workload and capital needed. Sole traders and partnerships have unlimited liability meaning that their personal assets may be ceased if the company enters debt and the owners may therefore decide to cut their risk and change their company to a limited company, either private or public. This limits their potential risk to losing only the assets of the company and not their own personal assets, therefore giving the company more scope for expansion. ...read more.

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