Types of Ownership

The types of ownership are mainly the sole trader, aka sole proprietorship, partnership and limited company which can later be categorized as private limited company (Ltd) and public limited company (plc).

Sole proprietorship (sole trader)

Sole proprietorship is a business which is fully owned and managed by one person. The owner can employ other people to help run the business. Since there is only one owner, therefore the income goes directly to the owner. As the sole traders’ only financial income is from the business or bank loan, they do not have the resources to expand and cover regional or national areas. These types of businesses are located in the small business sector and usually cover local areas. Sole proprietorship have unlimited liability, which mean that the owner will have to shoulder the responsibility to pay the debts in full even if they have to sell their business, personal possessions and assets when the business fails to pay its debts. Such businesses could be hairdressers, corner shops or market stalls.

Partnership

A partnership has two or more owners. They work, manage and are responsible for the running of the business. Individual partners may concentrate on a certain aspect of the business where they have expert knowledge. As there is more than one owner, larger amounts of capital can be fed into the business via personal funding or bank loans. Full partnerships have consisted of between two and twenty persons. The members of the business are governed by the Partnership Act of 1890 which ensures that every partner is equally liable for the business even if he or she owns just 1% of the organization. This is why it is important to set out a Deed of Partnership (partnership agreement) which will outline what each partner has put into the business, what are the responsibilities of each partner and how they will share the profits and losses. Examples of partnerships are accounting firms and solicitors firms. Partnership can be further categorized as limited partnerships an limited liability partnerships.

Limited Partnerships

Business where one or more general partner allow or enter a limited partner into the business. Limited partner is also known as the sleeping partner. Limited partner have limited liability compared to the general partner who is fully liable for the business debt. Limited partners may not draw out or receive back any part of their contribution to the partnership during its lifetime; or take part in the management of the business or have power to bind the firm.

Limited liability Partnerships

They are a corporate body which means they are separate from the members. An LLP does not have directors and share holders but it does have members. They have limited liability which means the LLP is liable for its debts for the full extent of its assets.