Types of Business Ownership

JCC Limited is a private limited company. Other forms of business ownership include:

The sole trader. This is the most common form of private sector business. This type of business has one owner who runs the business and may employ any number of people to help. Advantages of being a sole trader include the lack of legal restrictions, the sole trader is able to set up their business relatively quickly. Also all profits after tax are kept by the owner. There are a number of disadvantages to being a sole trader though, the main one being that sole traders have unlimited liability. This means that if the business gets into heavy debts then the owner is solely accountable and could be forced to sell personal possessions to cover these debts.

Partnerships. A partnership made up of a number to people (between two and twenty). The members of the partnership share the responsibility of running the business and also share any profits the business makes. After sole traders partnerships are the most common type of business. Although there are no legal formalities when a partnership is formed most partnerships will have a partnership agreement. A partnership agreement is a legal document which will state each partners rights in the event of a dispute, they cover issues such how the profits and losses will be shared amongst the partners, the rules for taking on new partners, the procedure for ending the partnership and all legal formalities.

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Public Limited Companies (PLC). This type of limited company tends to be larger than private limited companies. In order to become a public limited company the memorandum of association, articles of association and a statutory declaration must be provided, this document states that all the company acts have been met. Becoming a PLC tends to be very expensive. This is because, the company may use a financial institutions to process share applications. A PLC must have a £50,000 share capital and the company will have administrative and advertising expenses. There are several advantages to being a PLC as large amounts of money can be made from the sale of shares to the public and because of their large size PLC’s can often dominate the market. However due to the large size of most PLC’s the setting up costs can run into millions of pounds in some instances. Also as the shares are on sale to the general public it is possible that someone outside the company could take control of it.

Private Limited Companies, JCC Limited is a private limited company. These types of business tend to be smaller than PLC’s. Like PLC’s private limited companies have limited liability. This means that the owner, Mark Du Jardin in the case of JCC Ltd. can only lose what he has originally put into the business. The shares within a private limited company can only be brought and sold privately and cannot be advertised for general sale on the stock market. As the only shareholder Mark Du Jardin must agree on the transfer of shares. Private limited companies are often family run businesses, such as JCC Ltd. As Mark Du Jardin is the sole shareholder and therefore he owns the entire business. Control of JCC Ltd. cannot be lost to outsiders as the shares cannot be brought be the general public, also there is the opportunity for more capital to be made by the company as there is no limit on the number of shareholders, but it is unlikely outsiders will be offered shares as the Du Jardin’s want to keep the business in the family. Although in most cases the profits made in private limited companies must be shared between a much larger number of people, in the case of JCC Ltd. as Mark Du Jardin is the sole shareholder, this is not the case. If Mark Du Jardin decided to sell his stake in the business it can take time to find a replacement buyer. As there is a legal procedure to follow when setting up the company this tends to take time and cost money. There are several constraints of JCC being a private limited company. For example, the company will find it difficult to expand internationally because of its size. As JCC contributes only 0.5% of the nation’s cardboard box output it will be difficult to expand internationally because of the size of the company and if the business needs extra capital there is no other help or people to fall back on. JCC’s advantages include that the company has limited liability. Limited liability means that it is only possible for Mark Du Jardin to lose what he originally invested in the business. Mark Du Jardin keeps all profits after tax as he is the owner and sole shareholder. As JCC Ltd. is a family run business because the company’s shares cannot be brought or sold by the general public so unless JCC Ltd. becomes a PLC then the business will always be kept within the family. As a private limited company it is very difficult for JCC Ltd. To compete with the PLC’s as they have a high profile and a stronger reputation. There is a lot more formal documentation for JCC Ltd. as it is a private limited company rather than if it were a sole trader or a partnership. When forming a private limited company two documents must be produced. The first is the Memorandum of Association this must include:

The name of the company

The name and address of the company’s registered office
The objectives of the company
The amount of capital to be raised and the number of shares to be issued

The second document that must be produced is the Articles of Association this must include:

The rights of the shareholders depending on the type of shares they hold
The procedures for appointing directors and the scope of their powers
The timing and frequency of company meetings
The arrangements for auditing company accounts

If these two documents are successful the company will be awarded the Certificate of Incorporation which allows it to trade. The company must submit a copy of its annual accounts to the Registrar each year.

Types of Business Ownership