• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Trace the stages by which a small sole proprietorship might develop into a public limited company.

Extracts from this document...

Introduction

Commerce -Radhika Poduval Sr. 3C Trace the stages by which a small sole proprietorship might develop into a public limited company. Stage 1- The sole proprietorship The small sole proprietor wishes to expand his small business but cannot do so, for the following reasons: Unlimited Liability The sole trader is liable for the debts of his business to the full extent of his private assets, and may even be forced to sell his or her own home in order to pay off creditors Lack of Continuity Legally no distinction is made between the owner and the business so there is often a lack of continuity in the event of the owner's death. The business may have to be sold in order to meet inheritance tax liabilities. Difficulty in Raising Capital Sole traders may initially have to use their own savings and can later expand by ploughing back profits. However, there is a limit to the amount of capital that can be obtained by ploughing back profits. ...read more.

Middle

Specialization The introduction of new partners allows specialization, and can add a new dimension to a business. A firm may take someone into partnership simply to benefit from his or her particular expertise. Privacy Unlike a company, a partnership can keep its affairs to itself. Its annual accounts do not have to be submitted to anyone other than the Internal Revenue. However, a partnership suffers from the following disadvantages: Unlimited Liability There is no distinction between the owners and the business. They, like the sole proprietor, face unlimited liability Lack of continuity Because the business is identified with its owners, the partnership also suffers from a lack of continuity. If one of the partners dies, or has to leave the partnership for some reason the whole partnership is at an end, and a new one must be formed. Improper Partners Since any undertaking of one partner binds the others, it is important not to enter a partnership with someone whose business judgement is suspect. ...read more.

Conclusion

They are then available to anyone on payment of a nominal fee. Due to these disadvantages, further expansion may not be possible in this form of business and will thus require the establishment of a public limited company. Stage 4- The Public Limited Company The public limited company allows the sole trader to expand, and also gives him/her other benefits, due to the following advantages: Limited Liability The public limited company has independent legal existence, limited liability for shareholders and continuity of the business. Advertising for Capital It is allowed to appeal to the public for funds, whereas the promoters of a private company have to rely on friends and relations for capital. Transfer of Shares There is no restriction on the transfer of shares. Economies of Scale Public companies are normally larger than most other businesses. As such they often benefit from economies of scale. These result in the cost per unit of output falling as the level of output rises and further result in more capital, thus allowing for further expansion. This is how a small sole proprietorship progresses from such a small business, to a much more profitable enterprise such as a public limited company! ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Business, Companies and Organisation, Activity section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Business, Companies and Organisation, Activity essays

  1. English for business

    documents given by customs to show that customs duty has been paid and the goods can be moved. 5. declaration of goods and examination of them by the customs. 6. people working for the customs. 7. list of duties to be paid on imported goods.

  2. Business Studies

    currency fluctuations is not acceptable - business will need to use strategies to ensure the amount it receives/pays will not be affected - Interest rates and overseas borrowing > Obtaining finance in other countries at cheapest price > Exchange rate risk to the business - value of home country depreciates

  1. private limited company and public limited company

    Objective of the business? Manchester United FC's objective will be to try getting better coaches and buying enhanced players to improve their team. They will have to get bigger stadiums in order to sell more tickets, which will lead them to make money.

  2. Setting up a small or medium sized business.

    * Tea is primarily supplied by Tetley and PG. * Our water vendor is from Volvic mountainous water. * Juices are provided by Tropicana (fresh orange juice and lemonade) and Sunpride. * Pastries are provided by London companies such as Percy Ingles, Edmonton.

  1. Describe the Limited Liability Partnership and explain the emergence of this new legal form ...

    However, under s6 (4) of the act, the wrongdoer is liable to the same extent as the firm. This follows the liability of a company in negligence where the company can be sued, as it is a separate legal entity.

  2. Starting a Small Business

    course if possible as my partner and I would need to learn how to manage this business well. Task 2 (P2) I will identify my businesses target market by carrying out some market research. This will be in the form of primary research because it is already available and it is low cost and accurate.

  1. Applied Business Unit 1

    a sole trader is an ideal type of ownership for a small business as it is very simple to start off with and the company doesn't get the hassle of paperwork and shares. The company isn't fully publicized yet so it can continue selling its products without hassling from shareholders and its stocks.

  2. Importance of Human Resources Management

    Supply Side: If the organisation is to work out the supply of labour available then it must examine the numbers of people available to work, their ability to work, how long they can work for and their productivity in desired location.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work