• A SOLE TRADER (SOLE PROPRIETOR) refers to a type of business organisation that consists of a SINGLE OWNER.

• Examples can include private tutors, freelance photographers, plumbers etc... 

• My tutoring service business, called BOUNOMICS is run just by me and was very easy to set up, I only needed to invest a small amount of capital to buy my laptop and printer, also the legal requirements were minimal. I love working on my own because I have no-one to answer to, no-one to rely on, no-one to argue with, I can take as much time off that I want for holidays and keep all the company profits and secrets to myself. Also in my business it is very important to have personal contact with my customers to build up a rapport so its best for me to stay small. 

• This is fortunate for me, because if I want to expand it is extremely difficult as the only capital I have to invest are my own savings and retained profits, as the banks think I am too risky to lend to, and I can’t exactly issue shares can I?

• There are many problems with this type of business though, for example when it comes to doing my accounts I always waste so much valuable time and energy, and even then I make a lot of mistakes. In addition, when I’m sick I don’t make any money as I have no-one to cover for me and even if I could afford a helper, nobody wants to work for me as I can only offer low pay and zero professional development. Another drawback is the fact that I don’t have enough business nor capital to buy large quantities of my equipment such as paper and pens, so I can’t get any discounts and lower my average costs by buying in bulk.

• My biggest fear is going out of business and not being able to pay my mortgage and other expenses, apparently, my type of business has unlimited liability, meaning that if I owe suppliers money and I can’t afford to pay them, the law can take my home and sell it to pay them back and of course being on my own means I can’t share this risk with anyone else. I tell you, this type of stress is enough to send me to an early grave, which incidentally would be the end of Bounomics for good as this type of biz has no continuity meaning Bobby Junior will have no legacy from his old man…sigh!!!!....Well back to work!!!!

• A PARTNERSHIP refers to a type of business organisation that usually consists of BETWEEN 2 TO 20 OWNERS.

• In most cases the partners will create a PARTNERSHIP AGREEMENT (AKA a 'DEED OF PARTNERSHIP'), which details the amount of capital invested by each partner as well as how the profits are to be divided. 

• ….rather than work with complete strangers, I decided to call a couple of old mates, and apparently they were having the same problems and thoughts with their own tutoring businesses, so I proposed we get together and create a partnership. It was easy to set up, though we had to limit ourselves to just 20 as according to the law this is the maximum allowed, it’s the same for lawyers and dentists as well apparently, anyway we have 3 partners at present, and I reckon it won’t be too hard to attract new ones, nor secure extra finance from the bank at slightly lower interest rates than sole traders, now that we are an established professional company, though of course we still can’t issue shares what with the 20-owner limit.

• Anyway, this way the company now has more capital, as we are all putting our savings into the business and sharing the risks and benefits so we should all be motivated to work our hardest.  Also we can cover for each other when we are sick and specialise in the areas we know best, such as teaching, marketing and accounting. The legal requirements were not very substantial but we did need to create and sign a deed of partnership, detailing the size of our individual investments, duties, profit distribution, length of partnership and any arrangements for holidays and so on. I guess now I can’t take time off when I want as I’m not in complete control anymore sigh!!! Oh well! At least I still get to have personal contact with the clients.

• My biggest worry now, is how reliant I am on the other partners efficiency and honesty, now there are 12 heads we often have disagreements about the direction of the company, which slows operations down and if one of them slacks then everyone will suffer and as we still have unlimited liability, bankruptcy will still affect our personal property, thankfully, our internal accounts still don’t need to be declared to the public. Another drawback is the fact that if a partner dies the whole partnership has to be dissolved as there is still no continuity in this type of organisation either.

• A PRIVATE LIMITED COMPANY refers to a type of business organisation that is OWNED BY UP TO 50 SHAREHOLDERS, who are NOT PERMITTED TO PUBLICLY TRADE THEIR SHARES.

• ….Business continues to boom, but we had exhausted our savings and didn’t want to take anymore loans, as we were still completely liable for any  credit issues, and most of us had young families to support.

• I talked to a lot of my friends and family, and they really wanted to invest, but of course in a partnership, ownership is limited so my mate James suggested, we change to a private limited company. It sounded ideal because firstly, we can easily get the capital finance we need to expand by issuing shares to people we know and trust. They will receive part-ownership and a profit share, based on the number of shares they actually buy, and of course the number of shares we issue is up to us, so we can still stay in control as directors as long as we own the majority. 

• Secondly, I was so fed up worrying about the possibility of losing my home if the company gets in to trouble that this way we become ‘incorporated’ or in other words have limited liability which clearly distinguishes between both, and protects and reassures all shareholders that the maximum they could ever lose is their individual stock investments. Plus the business has continuity now, even if one of the owners passes away. 

• On the downside though, It wasn’t that easy to set-up and the legal process was far from simple. Thankfully, Julia, our resident legal expert, who we hired last month, helped us out. We needed to send the Registrar of Companies “the articles of association” which contained the rights and duties of the directors and “the memorandum of association” which contained details about the company such as names, objectives, number of shares of the directors and so on. Once sent, we had to wait for the Registrar to issue “a certificate of incorporation” to allow the company to start trading shares. 

• Another worry, is the fact that the shares can’t be sold or transferred to anyone else without the agreement of all the other shareholders, which is a bit inconvenient, especially if you need quick cash, and that’s the reason my Cousin Roger decided against investing, in fact this is probably the reason why we’re not permitted to offer shares to the general pubic.

• Further drawbacks include the fact that we have no more secrecy of accounts as we need to send them to the Registrar , who in turn publish them for the general public. 

• On a personal note, despite having a much greater income, I am much busier now, responsible for far more than before. We also have staff to front the business, so I have almost no contact with our customers which I miss terribly. I only get away once a year now, I mean if I, or indeed any of the directors, just took time off, we would jeopardise the whole company and break our contractual obligations to each other, as set out in the articles of association.

• We will continue to expand at a rate that keeps the business healthy and manageable, it is much more like a family now, each of us protecting each others investments for the greater good. Banks and suppliers all recognise our higher status and solid business practices so we are able to benefit somewhat from lower interest rates on loans as well as buy in bulk at discounted prices.

• All in all a very good move!!!!”

• A PUBLIC LIMITED COMPANY refers to a type of business organisation that is OWNED BY A MINIMUM OF ONE TO A MAXIMUM OF UNLIMITED SHAREHOLDERS, who are PERMITTED TO PUBLICLY TRADE THEIR SHARES, on the STOCK EXCHANGE.

• …well we had a staff of about 150 teachers and had diversified into University academic advising with a total of 20 counsellors, business was good!!!!! But it could do better!!

• When the government decided to offer licenses to the private sector, to establish a full-scale University we had an opportunity to expand further, but even though business was good there was no way we could finance that type of expansion unless we could sell more shares to more people. 

• The only way to do this was to ‘go public’, in other words become a public limited company. This way we’d have an unlimited number of shareholders, with no restrictions on their buying and selling , so we’d be able to raise a huge amount of capital funds.

• Apart from having no restrictions, this type of business organisation was very similar to the Private Limited Company in that we still had to complete costly and lengthy legal proceedings, though this time they were far more complex as we needed to get a listing on the stock exchange and produce and distribute thousands of copies of a prospectus that detailed our business operations to the public, so again no secrets. Anyway, this listing gave us a really high international status and so it was really easy to obtain capital finance from banks at low interest rates as well as get discounts due to our size.

• A further cost was the actual selling of the shares, which was expensive, as we needed to use a ‘merchant bank’ which charges high commission rates. 

• Thankfully, we still had limited liability and continuity after death, though now I and my former partners lost control of the business. This was because each shareholders has the right to vote and elect directors to control the company, and these aren’t always the major shareholders, therefore even though I still owned a large amount of shares I wasn’t elected at the Annual General Meeting (AGM), and had little influence on the company’s objectives.

• Of course, this led to many disagreements as the new Directors’ objectives and mine were sometimes different, but without any real power I have to rely on the management skill of the directors. Oh well!! at least I can sit back and take a holiday anytime I want now ;)

• SOCIAL ENTERPRISES differ from other private businesses as despite having PROFIT OBJECTIVES in order to survive, their MAIN FOCUS IS NOT MAXIMISING PROFITS for shareholders/owners, but rather using much of its profit surplus to meet SOCIAL OBJECTIVES such as PROVIDING JOBS and SUPPORT for POOR COMMUNITIES, and/or ENVIRONMENTAL OBJECTIVES such as PROTECTING THE ENVIRONMENT through SUSTAINABLE PRODUCTION METHODS.

• COOPERATIVES are private businesses a cooperative is a business that is owned and controlled by its members, and that is democratically managed. Cooperatives are voluntary associations of people who come together to meet their common economic, social, and cultural needs. Cooperatives are different from other businesses because they are member owned and operate for the benefit of members, rather than earn profits for investors.

Most countries have laws about what constitutes charitable work

as charities are usually allowed tax benefits. The following list is

typical of activities accepted as being for ‘charitable purposes’:

• prevention or relief of poverty

• advancement of education

• advancement of religion

• advancement of health or the saving of lives

• advancement of citizenship or community development

• advancement of the arts, culture, heritage or science

• advancement of human rights conflict resolution or

reconciliation, or the promotion of religious or racial harmony

or equality and diversity

• advancement of environmental protection or improvement

• relief of those in need, by reason of youth, age, ill health,

disability, financial hardship or other disadvantage

• advancement of animal welfare.

Charities often perform useful social and environmental functions

that would not be undertaken by private businesses or

government-funded organisations. They are dependent on private

contributions and these can vary in amount, making it difficult for

charity managers to plan. Some charitable work is duplicated – for

example, in social care or medical research – and it is argued that

such situations can lead to wasteful duplication.