Sole Traders
This is most common form of business organization. It’s a business that is owned and operated by one person although the sole trader can employ others; the owner is the sole proprietor. Sole traders have unlimited liability so his creditors can force him to sell his possessions in order to settle the debt. A tad harsh no?
Advantages of a sole trader
- There are few legal regulations for the trader to worry about when he sets up the business.
- The trader is his own boss. So he has complete control over his business therefore has no need to consult or ask others before making decisions.
- The trader has freedom to choose his own holidays, work hours, prices for the products, and whom to employ.
- The trader has the incentive to work hard as he is able to keep all the profits (after tax) with no need to share.
- The trader has complete secrecy in business matters; he only needs to give his information to the tax office.
Disadvantage of a sole trader
- The trader has no one to discuss business matters with because he is the sole owner.
- He does not have the benefit of Limited Liability. The business accounts cannot be separated from his own accounts. The business is not a separate legal unit so the owner is fully responsible for any debts the business may have to pay.
- The sources of finance for a sole trader are limited to the owner’s savings, profits made by the business and small bank loans, because banks are usually unwilling to loan a big amount of money to sole traders.
- The business is likely to stay small because the capital for expansion is so restricted.
- There is no continuity of the business after the owner’s death. 
Partnerships
Partnerships
- A partnership is a group or association between 2 and 20 people who agree to own and run a business together. The partners will contribute to the capital of the business, and will have a say in the running of the business and will share any profits made. Partnerships can be set up easily; to set up a partnership one only needs a verbal agreement and a written agreement called the Partnership Agreement.
Advantages of partnerships
- More capital can now be invested into the business which would allow the expansion of the business.
- The responsibilities of running the business are now shared.
- All the partners are motivated to work hard because they would all benefit from profits made. In addition any losses made by the business are shared by the partners.
Disadvantages of partnerships
- The partners have Unlimited Liability, however Limited partnerships do exist.
- The business does not have a separate legal identity. If one of the partners dies, then the partnership ends.
- Partners can disagree on important business decisions and consulting all partners takes time.
- If one of the partners is very inefficient or dishonest, then the other partners could suffer by losing money in the business.
- Most countries will limit the number of partners to 20 and this means that business growth is limited to the capital the 20 people could invest.
Private limited companies
There is one big difference between a company and an unincorporated business (like a sole trader or partnership). A company is a separate legal unit from its owners.
This means that:
A company exists separately from the owners and will continue to exist if one of the owners should die.
A company can make contracts or legal agreements.
Company accounts are kept separate from the accounts of the owners.
The company is owned by shareholders, they appoint directors to run the business. In private limited companies, the directors are usually the most important or majority shareholders.
Advantages of private limited companies
- Shares can be sold to many people. The sale of shares can lead to much larger sums of capital to invest in the business.
- All shareholders have limited liability. So if the company failed with debts owing to creditors, the shareholders can’t be forced to sell their possessions to settle the debts. The shareholder’s limited liability is limited to a fixed sum.
- The original owners of the company can keep control of it as long as they don’t sell too many shares.
- Limited liability encourages people to buy shares.
- The amount shareholders pay is the maximum they can lose if the business is unsuccessful.
Disadvantages of private limited companies
- There are many legal matters which have to be dealt with before a company can be formed (e.g. The Article of Association, and The Memorandum of Association).
- The shares cannot be sold or transferred to anyone else without the agreement of the other shareholders.
- The accounts of the company are more exposed, less private. Every year the latest accounts must sent to the Registrar of Companies and members of the public can inspect them.
- The company cannot offer its shares to the general public.
Public limited companies 
This form of business organization is most suitable for very large businesses. Most of the businesses which are well known to the public because they own large chains of shops or many factories are public limited companies.
PUBLIC LIMITED COMPANIES ARE NOT ALWAYS IN THE PUBLIC SECTOR OF THE INDUSTRY!!!!
The title given to public limited companies can cause confusion. This is why:
- In the UK, public limited companies are given the title ‘plc’ after the business name. E.g. J Sainsbury plc. - In other countries, the title ‘Limited’ is used.
This must not be confused with the UK use of ‘Limited’ which refers only to private limited companies.
Advantages of Public Limited Companies
- Limited liability
-The company is incorporated and a separate legal entity. There is continuity should one of the shareholders die
-There is now a very large amount of capital that can be invested into the business.
-There are no restrictions on buying, selling or transferring funds.
- high status will make it easier to attract investors and suppliers
Disadvantages of Public Limited Companies
- The legal formalities are quite complicated and time consuming.
- There are many regulations and controls over public limited companies in order to protect their shareholders
- Some Public Limited Companies become so big that it is difficult to control and manage
Here's a review of all we have learned
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