Business Function and Types of Business Ownership - Coursework Example

Business Function Contents Types of business 3 Three types of business ownership 4 Factors need to consider for starting a business 6 Reference 8 Types of business Businesses are of different types. It is broadly classified into two divisions. They are Unincorporated Firms and Incorporated Firms. Under these two division different types of business structure is present. Unincorporated Firms are those which do not have registration with companies’ houses. These firms are not registered as business. These firms are divided into two types like partnership and sole trader. In partnership business ownership of the business is shared among two or many partners. The partners start the business by signing up an agreement which clarify all the responsibility and rights of the partners. There are different types of partners present in a business. Some of the partners are called sleeping partner. They are the owner of business but they don’t get involve in daily activities of company. Partnership has unlimited liability. This type of business is majorly observed in law and accountancy profession. Each partners share profit and losses according to their contribution. Now a day many businesses are experiencing limited liability partnership. Here the partners do not take responsibility of other partners. This business is owned by at least two partners. The business type is a cross between limited company and partnership. Sole proprietorship or sole trader is another type of business. It is a very simple type of business. Here no legal things are required for starting trading process. Whole profit only belongs to the trader. He pays taxes on that profit. The trader has unlimited liability. There are some legal constrains in this type of business. Sometimes the trader becomes personally responsible for paying business debts. If he fails to repay debts then creditor claims on his personal property or assets. Incorporated firms follow a legal structure. These types of firms are registered in company houses. This type of business offers many benefits to its owner. Incorporated firms are divided into two public limited firm and private limited firm. In public limited company (PLC) a large number of shares are owned by public. The stocks of these companies are bought and sold on stock exchange. Anyone can have the ownership of public limited company. PLC has to follow the legal rule of producing files, account report and annual report to Company House. There are some other requirements of this type of business. It should have a Company secretary who is highly qualified and two directors. This type of business has limited liability. In private limited company majority of its share are owned by its different owners. Liability of this type of business is always limited to its share values and on shares which are issued. Therefore any debts of business are of the company, not of its owners. This business is also registered in Company House (Davies and Brant, ‎ 2006). The firm has to follow different legal documents and Article of Association for performing its business activities. The company has to maintain a Memorandum. Private limited company must have one director. The size of this type of business often varies. It can be large or small family owned business. Three types of business ownership There are many types of business ownership. But among all these types three major type of business ownership is very popular. They are as follows: Sole Proprietorship: In this type of business the owner entirely owns the business. He looks after the whole business operations. Here the owner has unlimited liability. If the owner fails to pay up the business debts then the creditor may claim personal assets of him. The owner is totally responsible for everything about the business. In this type of business the owner handle small size company. As the owner is the only decision maker of business so it is easy for him to start or end business according to his need. The owner has to take huge risk to establish his business. Business profit is considered as personal income of the owner. He has to pay tax for it. This owner of sole proprietorship faces the problem of limited funds. As a result the company growth becomes limited. Skills and talents of the owner are very important for this business. Rules and regulation of the company is formed by him. For example landscaper is sole proprietor. A landscaper work alone or sometimes hire a team which works under him by following his instructions. Partnership: In this type of business two or more owners are present who operates the business process for achieving common goals and objectives. For establishing the business the owners of partnership firm share resources, funds and risk among themselves. They sign different types of legal agreement for starting the business. Profit and loss of the company are divided among partners. Owners of partnership can form two types of business. One is general partnership where all the owners of business have unlimited liability. Another one is limited partnership where the owners have limited partnership which means creditors cannot claim personal assets for business owners for getting money (Pride, Hughes, Kapoor, 2014). In limited partnership owners so not take management responsibilities. The owners of partnership business contribute a lot in making the business successful for a long time. Public Limited Company: This type of business is owned by different shareholders. Any person can be the owner of public limited company (PLC) by purchasing its share. The owners of this company can be general people, intuition or government body. The owners of this company hold limited share. The shareholders of PLC face limited loss or profit. Boards of directors of PLC are also its owner. They hold maximum share of the company. These owners are selected on the basis of election. No single person can become the owner of PLC. The ownership of the company changes with the buying and selling of its shares in stock market. Death of any of its owner does not affect the business process of PLC. His ownership is transferred to any other owner of the company. Financial positions of the owners are disclosed in here for determining the value of its shares. For example Bank of America is a public limited company. It has many shareholders. Factors need to consider for starting a business For starting new business different factors need to be considered. These factors have a huge contribution in establish the business and making it successful. The factors are as follows: Market: It is very much necessary for the business owner to study the market properly where he wants to start new business. A proper analysis of market is required understand customer demand about the product or service (Carysforth and Neild, 2000). By this the business will also have an idea about suppliers, competition and price of the product which this new business wants to sell. Understanding the current trend of the market the company will develop its strategies and policies for establishing its business. Choosing rite market is an important task for the company. Location: Business location is a vital factor which has a great impact in affecting the cost of production. Location is selected for a business after analysis the availability of raw material, labour, transport, electricity, telecommunication service, economic situation etc. Presence of all these things makes a location appropriate for establishing business. Therefore proper location contributes a lot in business growth. If good business location is not selected them business can face heavy loss. Finance: Money is a major requirement for starting a business. It is considered as the life of business. The owner of business has to consider different financial needs associated with business. Considering financial condition of its targeted customers is also important. This will help the business to fix price of its products or services. Government policies: Different countries have different government policies which affects the business and its environment. The owner of the business has to understand which type of government policies will support activities of his business and help the company to grow. Sometimes government provides money for starting up business. It will help the firm to grow, Owner’s efficiency: Starting up new business is a very challenging job. The proprietor has to consider his skills and expertise for developing a business. He must have high quality of knowledge and experience regarding the product or service he is going to deal with in his business (Medina, 2006). He should have the courage to take risk. License and permits: For starting up any business license and permit is required for making its legal. There are different rules and regulation for getting business license. For starting a business the owner has to fulfil or follow these rules to get valid business license. Before starting the business he should notice that all license and permits are cleared from different agencies. Time: Time plays an important role in establishing business and performing different functions of it. For achieving success a business requires certain time. The owner of the business has to divide time according to business plans and objectives. If he wants to start his business within a short span of time then he must plan different activities which can be implemented in less time. Reference Carysforth, C. and Neild, M., 2000. Intermediate business. Oxford: Heinemann. Davies, P. and Brant, ‎J., 2006. Business, economics and enterprise: Teaching school subjects 11-19. New York: Psychology Press. Medina, R.. 2006. Business organization and management, 2006 Ed. Philippines: Rex Bookstore, Inc. Pride. W, Hughes. R, Kapoor. J., 2014. Foundations of business. Stamford: Cengage Learning. Read More