Forms of Business Organisation
Forms of Business Organisation
1. Money (capital)
2. Risk
3. Organizational structure
FORMS OF BUSINESS ORGANISATION
1. Money: Does the money (capital) facilitate investment in the
business? How much money is needed for the venture?
How do they differ in the three factors of: money, risk and business
structure?
1. THE SOLE TRADER
FORMS OF BUSINESS ORGANISATION
THE SOLE TRADER
• A form of business organization where one operates on their own.
1. Limited Partnerships
A Limited Partnership (LP) is created under the Limited Partnership Act (1907).
This type of partnership consists of at least one general partner who manages the
business and bears unlimited liability to creditors, and at least one limited
partner.
The limited partner must contribute a specified amount of capital on joining the
partnership. Their liability to creditors or their fellow partners cannot exceed that
amount.
FORMS OF BUSINESS ORGANISATION
The limited partner may not bind the firm and may not take part in the
management of the firm’s business, even if they do not agree with
management decisions. If they do, they lose their limited liability.
• PFLPs have some differences from the traditional model described above:
In an PFLP, the limited partner does not need to notify the Registrar of the
amount they have contributed to the PFLP (it is not a filing requirement).
Another difference is that there is a certain list of activities which the
limited partner is allowed to undertake while being a limited partner.
FORMS OF BUSINESS ORGANISATION
•A new partnership can be registered as an PFLP to start with or an old partnership
under the Limited Liability Act can revert to PFLP status.
To register as an PFLP:
• All partners have limited liability and their liability is limited to the amount
they put into the partnership.
There are three types of companies, all of which are regulated by the
Companies Act (2006):
• Is a commercial company
• This means that the members are only liable for the
sums that remain unpaid on their shares if the
company goes into liquidation.
FORMS OF BUSINESS ORGANISATION
• The number of members can be restricted by the articles of
association
• Secure their funding from the public and advertise the fact that they
are offering shares for sale.
• They are allowed to offer their shares for sale to the public, but they
are not obliged to. Some do and some chose not to. Either way, both
are subject to the Financial Services and Markets Act (2000) and the
rules made under it by the Financial Conduct Authority.
FORMS OF BUSINESS ORGANISATION
• When offering their shares to the public, they must
issue a prospectus which gives details of the
company’s financial plans.
• The division of ownership and control only really works for large
private companies whereas 90% of companies are small private ones.