TYPES OF BLISIINESS

TYPES OF BLISIINESS

The simplest form of business is the individual proprietorship or sole trader:

for example, a shop (US = store) or a taxi owned by a single person. It several individuals wish to go into business together they can form a partnership; partners generally contribute equal capital, have equal authority in management, and share profits or losses. In many countries, lawyers, doctors and accountants are not allowed to form companies, but only partnerships with unlimited liability for debts - which should make them act responsibly.

But a partnership is not a legal entity separate from its owners; like sole traders, partners have untimited liability: in the case of bankrupcy, a partner with a personal fortune can lose it aIl. Consequently, the majority of businesses are limited companies (US = corporation), in which investors are only liable tor the amount of capital they have invested If a limited company goes bankrupt, its assets are sold (liquidated) to pay the debts; if the assets do not cover the debts, they remain unpaid (i.e. creditors do not get their money back.)

In Britain, most smaller enterprises are private limited companies which cannot otter shares to the public; their owners can only raise capital from friends or from banks and other venture capital institutions. A successful, growing British business can apply to the Stock Exchange to become a public limited company; if accepted, it can public a prospectus and offer its shares tor sale on the open stock market. In America, there is no legal distinction between private and public limited corporations, but the equivalent. of public limited company is one registered by the Securities and Exchange Commission.

Glossary:

Sole trader - an individual proprietor, the simplest form of business;

Partnership - a business run collectively by two or more individuals, who share risks

and profits;

Public limited company(PLC) - a successful, established company that is allowed to

offer its shares for sale on the open stock market;

Unlimited liability - the legal obligation to pay all one's debts, if necessary by the

sale of one's possessions;

Limited liability - responsibility for debts up to the value of the company's share

capital;

Securities - saleable papers traded on stock exchanges, that yield an income (dividend, interest, etc.);

Share (GB) or stock (US) - a security representing a portion of the nominal capital of a company;

Asset - anything of value owned by a business that can be used to produce goods, pay

liabilities, etc.; often used in the plural - assets;