If you are fed up working for somebody else, then you may be looking to start your own business, and if you have you considered the different types of business that are available? In this blog we look at some of the options that are open to young new entrepreneurs, and we start with the sole trader.
Possibly the oldest trade that there is, is the sole trader, it is also the simplest form of running a business and for that matter the most common. The sole trader is really a Jack of all trades, what this means is that he is responsible for every facet of the business. This is usual form of trading for small business that provide services, such as gardeners, hairdressers, beauticians and so forth. Generally, the sole trader starts their business with their own savings or a bank loan, but as they progress they may need additional funding. When this occurs then the business model will have to change.
A partnership is when two or more people join together to form a business, they share an agreed proportion of debts, decisions and profits. Quite often this type of business arrangement is for services such as dentists, doctors, accountants and solicitors. An equal partnership is when everything is split exactly proportionally to the amount of partners that are in the business.
A joint stock company or a limited company is a business that has been formed by numerous people who have put money in to form joint stock capital. The people are known as shareholders, and each of them own a share of or a part of the business, and is rewarded by a share of any profits. The amount of shares each person receives is directly proportionate to the amount of money they put in. Although shareholders only own a part of the company, it is legally considered to be an entity, therefore should the company go bankrupt the shareholders are liable.
Public Limited Companies
A PLC is by far the most complex of all businesses, and they are normally very large concerns. A PLC must have a board of directors and a certificate of trade, these types of businesses can raise money by selling their shares on the stock exchange. This means everything about the company including its accounts and finances are in the public domain for anyone to see. The business has to be regularly audited and make the required information available to the relevant authorities.
Private Limited Companies
Normally small, family owned businesses are classed as private limited companies, any shares are only made available to a certain group, such as family members. Shares of this type of business are not available publicly and not available on the stock market. These are the most common types of businesses, there are others such as workers co-operatives, franchises and limited liability partnerships. Although less common they still are valid types of businesses and do occur all over the world.
When starting off in business and creating a company, you must have a business plan what type of operation you wish to run. Most individuals start off as sole traders or partnerships, and as the company grows may change into something more appropriate.