 |
| Picture by: Stareater |
Sole Trader
Sole
traders are single individuals carrying on a business on their own. The most
common form of business organization is that of a sole trader. It is easy to
establish such a business for there are few formal procedures. Below are some
advantages and disadvantages of a Sole trader.
Advantages
|
Disadvantages
|
The
owner makes independent decisions and have complete control over management
|
Unlimited
Liability
|
Personal
contact with employees and customers
|
Lack
of continuity in case of owner’s death. The business may have to be sold to
meet inheritance tax liabilities
|
High
profit since sole traders start business with their own capital
|
Has
to bear the demands of hard work, long hours in the competitive market alone
|
Less
paper work compare to other businesses
|
Technological
enhancements are few in such business because cannot afford the heavy capital
needed.
|
Partnerships
Partnerships
are two or more individuals joining together sharing profit and losses to run a
business. In partnerships there is a written agreement between the partners
stating how the profit and losses will be divided among them. It is one stage
beyond the sole trader but it does not necessarily grow out of sole proprietorship. Sometimes a business begins as a partnership. The management
of the business is carried out by all the partners of the business and they
should all be consulted before any vital decision related to the business is
taken. For example, a meeting is held between all the partners of a firm to
decide on the opening of a new branch or office. Below are some advantages and
disadvantages of a partnership.
Private Limited Company
Advantages
|
Disadvantages
|
More
capital since more people are involved
|
Unlimited
liability.
|
More
people allow specialization. For example, one of the partners could be
specialized in the field of telecommunications while one of the others could
be specialized in the field of Architecture. Their expertise can be used for
the development of the business. To widen its prospects in the market, this
will allow them to be a strong competitor.
|
Lack
of continuity in case of death of a partner. If one the owner dies or leaves
the partnership, the partnership is at an end and a new one has to be formed
|
Since
each partner has a say in what goes on in the organizations it allows
disagreements which may cause delays damaging to the business
|
|
May
suffer shortage of capital since there is a limit to the amount of capital
that can be withdrawn from the partners.
|
The
distinctive feature of a private limited company is its ownership. They are
owned and financed by individuals. This type of companies wary in nature and
size and the type of goods and services provided and also their name must end
with the word “Limited”. Some sole traders may start the business as a limited
company just to obtain the benefits of limited liability. It allows a large
number of people to contribute funds since they wouldn’t have to incur any
further capital to meet company debts.
Advantages
|
Disadvantages
|
Limited
liability due to its independent legal status
|
A
shareholder of the company can only transfer his or her shares to someone
else with the consent of the other shareholders.
|
With
limited liability the company is able to attract capital from people who
would not otherwise be prepared to invest.
|
Since
they are not allow to sell shares to the general public it would be difficult
to raise funds for expansion or development of the business
|
The
founders of the company can keep control of the business by holding majority
of the shares
|
Public Limited Company
The
largest and most important business units are composed of public limited
companies. For example Unilever employs over 300,000 people and their sales
average over 60 million every day of the year. Public limited companies are
operated by a wide range of investors. The name of such companies must end with
the words “Public limited company” (plc). Below are some advantages and
disadvantages of a Public Limited Company.
Advantages
|
Disadvantages
|
Limited
liability due to its independent legal status
|
Complex
formalities in the initial forming of the organization
|
Contrary
to Private limited companies, it is allowed to appeal the general public for
funds
|
Raising capital
can be expensive
|
No
restriction in the transferring of shares
|
Have
to comply with several regulations put forth by the government in order to
protect the shareholder or the general public.
|
The
owners have little control over the business.
|
Voluntary Organizations
Voluntary organization
also known as non-profit organizations include private societies and charities run
by individuals. The prime beneficiary of such organizations is public at large.
Below are some advantages and disadvantages of Voluntary Organizations. There
are a range of functions that are carried out by voluntary organizations. Some
of these functions include:
·
Culture and
recreation.
·
Education and
research.
·
Health.
·
Social Services.
·
Development and
housing.
·
Environment.
Advantages
|
Disadvantages
|
Flexibility
– Such organizations are easy to setup and close down if needed.
|
Unlimited
liability.
|
Privacy
– Have total control over the operations of the organization.
|
Will
not be able to carry out projects that require a big budget.
|
Reputation
– Since such organizations exist to make contributions to community care,
with the activities carry out for this purpose they will be able to have a
high reputation among the citizens.
|
The
income received through charity can only be used for the organization’s
charitable objectives.
|
Income
can be earned through charities.
|
|
Relieved
from having to pay taxes. Example: No cooperation tax.
|
Cooperatives
A cooperative is defined as a business which is owned and operated
by a group of individuals for their mutual benefit. Some of the types of
cooperatives include:
·
Retail
Cooperatives.
·
Farming
Cooperatives.
·
Consumer
Cooperatives
·
Worker
Cooperatives.
One of the largest cooperative is The Cooperative Group in UK.
Currently they operate 4,500 retail outlets and almost 87,000 employees. Their purpose as mentioned in their
website is “Championing a better way to do business for you and your
communities”. This company branched out their business in the field of
electricity, estates, funeral care and insurance etc.
As mentioned above the certain types of cooperatives, they all have
distinguishing characters from one other. They can be characterized by the
structure as well as the product or service they provide. The labels they are
given depends on either the structure or a service. For example a group of
individuals form a cooperative to open a grocery store to sell food. This is
called a consumer cooperative as well as a food cooperative. One label is
defined by the structure; the consumer and the other is labeled by the product
or service; food. Either one of these labels can be used to form the
cooperative.
Advantages
|
Disadvantages
|
Open membership – Unless specified any individual can join the
cooperative and leave when he sees fit.
|
Limited resources – Financial strength depends on the capital of
its members and since the members involve individuals belonging to lower or
middle class makes it difficult to operate large scale projects.
|
Service motive – Assists its members and consumers on the
marketing and production of the products or services.
|
Inefficient Management – An open membership has its drawback when
its members do not have the required knowledge of skills to sustain and grow
the business.
|
Democratic Management – equality is widely practiced among all
members thus every member has a say in the decisions made.
|
Disputes among members – Another drawback of having and open
membership is it allows people of different views and background to join as
members thus forming disputes.
|
Stability and continuity – Since membership is open to all, the
cooperative does not stop its operations due to a death or leaving of a
member. With new members comes new ideas and this allows for a stability and
continuation.
|
Lack of secrecy – The operations of the cooperative is discussed
is openly discussed which allows for competitors to compete easily.
|