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There are various types of business organization which operate in the private sector.
A business run by a sole trader has just one owner, who is entirely responsible for all the company’s business affairs. This type of organization has certain advantages and disadvantages.
1. The sole trader doesn’t have to consult anyone else when making decisions but at the same time a sole trader has to bear 100% of the risks incurred by his company. For this reason he may have more difficulties raising capital. The profits do not have to be shared with anyone else but a sole trader has unlimited liability for his company, which means that if he goes bankrupt, he may lose both his company and his personal property.
2. A business run by a partnership has two or more owners. When entering into a partnership, an agreement is drawn up defining the rights, responsibilities and liabilities of each partner, such as how the profits are to be distributed and what part each partner is to play in managing the company. The partners may be active, meaning that they are actively involved in the company’s business; or sleeping, which means they invest money in the company and receive a share of profits, but do not concern themselves with the company´s business affairs.
3. From a legal point of view, a joint-stock company counts as a separate person, which means that its shareholders (owners) and directors (the people chosen by the shareholders to run the company) only have limited liability. There are two types of joint-stock company: public limited company (pic) and private limited company (Ltd.). The capital for public limited company is raised from members of the public. For this reason, a pic can be listed on the stock exchange, although it doesn’t have to be. Before it can start doing business, a pic needs to have a minimum amount of share capital. There are much more private limited companies than public limited companies. The shares of a private limited company are held by specially chosen persons or companies, which means it can’t be listed on the stock exchange. However unlike public limited companies, private limited companies don’t need a minimum amount of share capital - it’s theoretically possible for a private limited company to have just one share held by one person. (2300)
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