Business Organisations notes

Sole trader

Definition

  • Owns their own business e.g. hairdressers, plumbers, farmers etc

  • Must be registered as self employed with revenue

  • Must register business name with Companies registration Office

Legalities

  • Business names Act 1963

  • Health and safety

  • Self-employed tax system

  • Register for VAT

Advantages

  • Be your own boss

  • Keep profit

  • Makes all decisions

Disadvantages

  • Unlimited liability (may lose private wealth)

  • Suffers all losses (bears all risk)

  • Long hoursUncertainty

Partnership:

Definition

  • A business owned between 2 and 20 people

  • Usually formed between solicitors, accountants etc

Legalities

  • Business Names Act 1963

  • Partnership Act 1980

  • Deed of Partnership

Advantages

  • Have access to greater amounts of capital (up to 20 partners can bring financial resources)

  • Have access to different skill sets

  • Can lead to more effective decision making

Disadvantages

  • Unlimited liability (they are responsible for the debts of the business if it goes bankrupt. They may have to forfeit their personal assets in order to pay business debts)

  • Partners are jointly and severally liable. Collective responsibility for each other’s debts

Private Limited Company:

The Companies Act 2015 provides for the creation of two types of private limited company

  • A company limited by shares (Ltd)

Expected to be the most widely utilised companies

1-149 shareholders

May dispense with holding the AGM

No requirement for authorised share capital (No limit for number of shares it can issue)

Articles of Association only (no objects clause. The company will not be restricted in what it can do)

  • A designated activity company (DAC)

Most closely resemble current private limited companies

Minimum of 2 directors

1-149 shareholders

Cannot dispense with holding the AGM

Must have authorised share capital

AGM: [