Company under English law

There are many ways in which a business may be owned under the legal system of England and Wales.

Different types of ownership are suitable for organisations depending on the degree of control the owners wish to have over the business. The choice of ownership methor also relates to the organisations ability to raise funds for the business activities. The ownership method also alters the rules under which the company must be administered.

Because ownership is key part of business planning it is essential to take into consideration:

The three main forms of ownership for starting business are: Sole-trader, Partnership and Limited company.

This is a business where any one person is the owner. Their business is unincorporated so the owner is ultimately personally liable for the business. Sole traders are able to control the business – make all of the decisions. This makes the business highly adaptable. However raising the capital for such businesses may be quite difficult because it is a risky option for investors.

These businesses are often quite small however the number of them is very large. Examples of these businesses are mostly found in the service sector such as electrical repair, retail shops, hotels and driving instructors.

The business is easy to set up, there is no formal procedures and operations can commence immediately (unless there is special permission required). The owner is able to decide the way which is the business he has the flexibility to restructure or dissolve the business as he sees fit. This enables the organisation to be quickly adaptable however competitors which are able to gain capital more quickly are more likely to succeed when there is a need to be more flexible.

Sole traders do not need to keep detailed accounting information however it may benefit them to as some groups such as lenders may require this information. They have to pay taxes themselves which does require them to keep some information.

Sole traders have unlimited liability which means that the law does not see them as separate from their business, there is no difference from the money of the business and that of the sole trader meaning that if the business occurs debts then so does the owner. This is a key factor to take on and failure may lead to the loss of possessions and bankruptcy.

Partnerships are defined by the Partnership Act of 1890: "The relationship which subsists between persons carrying on a business in common with a view of profit". A partnership is neither incorporated nor registered as a company; generally partnerships consist of ordinary partners who are legally liable for the business.

By starting this type of business you are able to raise capital more freely. The business is not reliant upon one persons skills. The business can use different persons strong points to their advantage. This is applicable to accountants – one may be able to give advice easily, whereas the other member finds he or she is more capable of sorting accounts. These partnerships are most prevalent among the professional industries such as architects, doctors and solicitors.

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Wikipedia