DIFFERENT TYPES OF BUSINESS IN THE UK Introduction There are four ways of doing business in the United Kingdom. First is the sole trader. Then there is the partnership firm. Third is the private limited firm. Then finally, you have the public limited firm. All these firms have their plus points and drawbacks. They get their sustenance from the dedication and hard work of their employees and board of directions except the sole trader and the partnership firm. The sole trader and the partnership firm derive their benefits by their own efforts and risks. There are 4.5 million small and medium sized enterprises in the United Kingdom today.
Of these, 2.1 million are home based. These employ about half of the UK’s workforce and account for 40% of UK’s turnover. Small firms have turnover of less than 5.6 million annually and medium sized enterprises have turnover of less than 22.6 million annually. The UK is a service led economy. The small firms provide different types of small business services. They provide support for larger business customers or deliver services directly to consumers. They comprise the sole trader, partnership or private limited companies.
They mainly operate in industrial trade and repair, business finance, consultancy, accountancy, sales and marketing, IT support, legal advice, recruitment and retail based services (Small Business Services from Businesslifeline. com). The Sole Trader This is the simplest form of business which does not require any registration. There is only the need to notify the local tax office. The sole trader carries on his trade at his own personal cost and risk. He does not have to file accounts or any other records with the Companies House. He does business on the strength of his own reputation and capacity.
It is not possible to verify his credentials. The type of business that one must do is determined by the nature and size of the business. The sole trader may be satisfied with doing jobs such as window cleaning, plumbing, electrical fittings, groceries, and the like. The sole trader is solely responsible for the liabilities incurred by his firm. He is compensated or suffers loss as a result of the risks he takes in the course of his business (The Different Types of Business Status in the UK). The Partnership Firm The partnership firm is more elaborate and the liability of the firm is the responsibility of the partners.
The partners share the profits gained or loss incurred by the firm as a result of their business undertakings. Partnerships may be equal or based on certain rations such as 10:5 between two partners or 5:3:2 in the case of three partners, etc. The partners may draw up a ‘Deed of Partnership’ and although this is not a legal requirement it could be useful in settling disputes if they arise in the future.
It is good to get legal advice from a solicitor before entering into partnerships (Sole Traders, Partnerships and Companies). Private Limited Firms The private limited firms in the United Kingdom are separate entities from those who own them. The accounts and records of this firm have to be filed with the Companies House. The shareholders in the private limited company have limited liabilities in the firm. Their liability is limited to the amount they have invested in the company’s shares. Their personal possessions do not figure in the company’s liabilities. Within the private limited company setup, there are three different types of liabilities.
The first one is the amount unpaid on the shares held by the shareholders. The second is the amount the shareholders have agreed to contribute to the company’s assets should the company wind up. And thirdly, when there is no limit to the members’ liability. It is possible for third parties to get the company’s records for verification. Private limited companies are by far the most well defined and simple to run commercial establishments.
Private limited companies can be registered with ease (Sole Traders, Partnerships and Companies). Apart from limited liability, private limited companies have flexible borrowing powers, ownership of property, and they can carry on business despite resignation or bankruptcy of individuals. They can also add new shareholders and investors (Types of Businesses). Public Limited Companies Public limited companies are formed by a promoter or promoters who offer shares to the public. Public limited companies are owned by shareholders. These companies are run by a board of directors on behalf of the shareholders who receive dividends on the number of shares held by them.
Dividends are paid when the company earns profits. In order to create public limited companies, the directors have to apply to the Stock Exchange Council who will then examine the company’s accounts first. Public limited companies are invariably formed to run large corporations. They have their shares traded on the Stock Exchange. The advantage of having shares traded on the Stock Exchange is that large amounts of capital can be raised very quickly. The disadvantage is an outsider can take over the company if he buys sufficient amount of shares from the present shareholders (Types of Businesses). Conclusion Most individuals start their business to be self-employed on the basis of their skill and experience.
Talent, though necessary, is not enough for these individuals. They have to have a sound business plan, personal commitment, ability to work hard and adapt to tough situations when they arise. They have to learn the art of handling money judiciously and conform to the laws and regulations governing business. Failure may result in the first or first few years of operation for individual or individuals due to poor business planning, lack of accounting controls, bad debts, competition, and marketing strategy. Nonetheless, those who survive the present credit crunch due to the global economic meltdown are highly geared to investment and growth.
They rely less on bank and non-banking finance. They are successful due to their capability to stand on their feet in difficult times. They have the means to remain standing when others around them are falling. They have the proven ability to show that they have what the industry needs (Small Business Services from Businesslifeline. com). Sources: Business and property, http: //www. basingstoke. gov. uk/business/ Different Business Types, Omega Accountancy, www. omegaaccountancy. co. uk/different-business-types. html Different Types of UK Companies, Complete Formations, http: //www. completeformations. co. uk/types-of-uk-companies. html Save money by using energy more efficiently, Practical advice for business, http: //www. businesslink. gov. uk/bdotg/action/detail? type=RESOURCES&itemId=1079432698 Small Business Services from Businesslifeline. com, http: //www. businesslifeline. com/ Sole Traders, Partnerships and Companies, http: //www. howtobooks. co. uk/business/small-business/sole-trader. asp The different types of business plan, startups. co. uk/. ../the-different-types-of-business-plan. html The Different Types of Businesses Status in the UK, http: //www. simpleformations. com/types-business. htm Tim Berry, The Different Types of Business Plans, http: //articles. bplans. co. uk/writing-a-business-plan/the-different-types-of-business-plans Types of Businesses, Turkish British Chamber of Commerce and Industry, www. tbcci. org/businessTypes. php Types of organization in the private sector, http: //www. thetimes100.co. uk/theory/theory--types-businesses--340.php