In this report the private business that is chosen is Primark, it is a limited business with shareholders with a limited liability. The shares of a private liability company may not be offered to the public because they will not be on the stock market. Primark is an international retailer that offe...
Unit 1 Assignment 1
Issue Date: 6.10.21
Hand in Date:17.11.21
The Features of differences between Private and Charity Businesses
Introduction:
In this report the private business that is chosen is Primark, it is a limited business with
shareholders with a limited liability. The shares of a private liability company may not be
offered to the public because they will not be on the stock market. Primark is an international
retailer that offers the latest fashion, beauty and homeware at the best value on the high
street. The charity business that is chosen is Cancer Research which is a non-profit
business it is governed and funded by a Council of trustees and they raise money through
donations, it is a retail and corporation partnership, they find ways to to help people with
cancer and they sell clothing, bric and brac items which include books, pictures and they
also sell furniture at cheap prices for example cupboards in their stores. I will continue to
include more information on both private and non profit organisations in my report.
A1: Features of Business
When it comes to features of business the word feature means characteristics or attributes.
Therefore a business features the characteristics that make up for every organisation. For
example, sole traders are known as one man bands, theses included: a plumber, electrician,
hairdressers they all offer a service to customers who live locally. While other businesses
might be very large and sell their products and services around the world for example: Sky,
BT and BBC. There are different types of customers who use services and buy products
from different businesses and share different experiences for example: family and friends.
Ownership and Liability:
There are three categories of businesses: Private, Public and non-for-profit.
Private
● Private companies are those owned by citizens therefore they are liable for all
aspects of the companies. Owners of private companies are likely to take many risks
which include making a profit. Any private owned companies can range from small to
large and will be owned by many people which includes a board. For example
companies like Dyson Specsavers, Morrisons and National Tyres and Autocare.The
are examples of small private companies which include auto repairs, food trucks,
personal trainers. A private company is a corporation whose shares of stocks which
are not publicly traded on the open market, Which are held individually by one or a
few individuals. Privately owned companies will include family owned businesses,
sole proprietorships, and has a vast majority of small and medium size companies.
The private sector is a part of the economy that is run by individual people including
companies that are for profit only it is not state controlled. Therefore it encompasses
all for profit companies which are not owned or operated by the government.
,● A sole trader is owned by one single individual, which is a single ownership. Sole
trader is also known as a sole proprietorship (Ref 1) is a simple business structure
that owns the entire business, a sole trader is entitled to keep all profits after taxes
have been deducted but it is also liable for all losses that the business incurs. The
business has a limited life span, it would cease exits when the owner dies. It has
limited access to the capital and there are no losses because there is no one to
share it with and it is legally responsible for all aspects of the businesses which can
mean that the sole trader can lose all of its assets if the business goes into debt. A
sole trader is easy to set up, it has low start up costs and then can easily change the
business structure, with a sole trader there is a maximum privacy and any taxes must
be paid, but tax may not be the most efficient in sole trader.
● The definition of a sole trader refers to the legal structure of a business, rather than a
number of employees, unlike limited companies which are required to follow a
process called incorporation there is no specific process for registering as a sole
trader. Instead all a sole trader has to do is register as a self employed person by
registering for a self assessment the most common way to do this is directly through
HMRC Website. It is recommended sole trader register as soon as possible due to
being no later than the 5th of October in the business second tax year, if not done in
time sole traders can be fined. A sole trader will become liable for paying a number of
different taxes for example, Income tax and National insurance, these are assessed
yearly. Sole traders may or may not register for VAT, they would be required to
register for VAT if they have a taxable turnover regarding the VAT threshold which
includes a sole trader can voluntarily register for VAT if their turnover is below the
threshold. The sole traders are responsible for business finances, charging VAT on
goods and services sold to customers, paying VAT on business purchases,
submitting VAT returns, keeping VAT records and VAT accounts, they also have to
have unlimited liability. If the sole trader gets into debt they have to pay any debt out
of their own pocket. The advantages (Ref 2) of being a sole trader are: being the
boss, keeping all the profits, easy to set up, low start up costs, maximum privacy and
easy to change the business structure. The disadvantages of being a sole trader are:
unlimited liability, tax may not be efficient, harder to take breaks, be decision maker,
less attractive to clients and difficult to secure funding.
● A partnership is the relationship or arrangement of two or more people that oversees
business operations and carrying out a business with a view of making a profit and
sharing liabilities, both parties are responsible for running the business and sharing
the profit between themselves including, having a contract or an agreement. They
share risks and rewards within the business, each partner is legally entitled to share
the net profits of the business including any risk of the business failing. Also the
partnership debt is split between all partners within the business. The purpose of a
partnership agreement or contract is to establish a business enterprise through a
legally binding contract between two or more parties or legal entities. This
partnership agreement designates the rights and obligations (Ref 3) of each partner
or entity involved. There are eight characteristics of partnership in business theses
are: contractual relationship, two or more partners, existence of business, earning
and sharing of profits, extent of liability, mutual agency, implied authority and
restrictions on the transfer share.
,● A partnership is the relation between two or more people who have decided to pool
their resources, skills, and money into a business which includes any profits and
losses in an agreed ratio.(Ref 4) The members of a partnership are jointly known as
the partnership firm. Contents of a partnership deeds are: the name of the firm, name
and details of all partners, the date of the business started, the time of the firms
existences, capital contributed by each partner, profit and loss sharing ratio, interests
on capital payable to partners and the extent of borrowings each partner can draw.
● A private limited company, or LTD which stands for limited can be a small or large
business. A private limited company (Ref 5) has limited liability in which the owner
liability is limited to their shares, the firm is limited to having 50 or fewer
shareholders, shares are prohibited from being publicly traded. There are four
characteristics (Ref 6) of a private limited company: ownership in case of a public
company, the shares owned can be sold to the public in the open market. A minimum
number of shareholders in a case of a private limited company there can only be a
minimum of two shareholders. Legal compliances needed, minimum share capital
and continued existence. A private limited company is a firm which is held under
private ownership which means they may issue stock and have shareholders, but
their shares do not trade on public exchanges and are not issued through an initial
public offering. It operates as a distinct legal entity to the directors and shareholders
only, as the company is an individual in its own right this means all business assets,
liabilities and profits belong to the company itself while shareholders are not
responsible for any debts incurred by the company. The benefits (Ref 7) of a private
limited company are: limited liability which includes, company finances are separate
from any personal assets, tax efficient which means one of the manger limited
company advantage is over sole traders, prestige and assurance, simple to set up
and simple to run and brand protection.
● A public limited company is a form of business organisation (Ref 8) that operates as
a separate legal entity from its owners it is formed and owned by shareholders,
shares of a public limited company are listed and traded at a stock exchange market
freely which means a public limited company can offer shares to the public and can
be more open to the public about its details than a private company. PLC is short for
public limited company section 4(2) of English Companies Act 2006 (Ref 9)
describes a public limited company by guaranteeing and having a share capital.
There are three main features of a public limited company: firsty the business has the
ability to raise additional finance through share capital, second the shareholders have
limited liability and last of all increased negotiation opportunities with suppliers in
terms of prices. This is because larger businesses can achieve economies of scale.
The primary goal of public limited companies is to generate profit in order to
maximise shareholder values.
, ● A cooperative is a member owned business structure with at least five members, all
of which have equal voting rights and a voice in how the business is run regardless of
their level of involvement or investment. A cooperative company usually only allows a
limited distribution of profits to members but some cooperative companies do not
allow it. Services and goods are provided by the co-op benefit and serve the member
owners. The term cooperative describes a wider movement of mutual enterprises
which include all cooperative societies, community benefit societies. However, not all
cooperatives use legal structures; many are in fact limited companies. A cooperative
society (Ref 10) is an association of different individuals coming together to achieve
an economic: cultural and social aspiration. On the other hand, a company limited by
guarantee as the name implies is a company incorporated with the aim of promoting
a particular type of objective. A cooperative company including owners and members
only have limited liability. There are six characteristics (Ref 11) of a cooperative
company: democratic member control, member economic participation, autonomy
and independence, education and training along with information, cooperation among
its cooperatives and the last one is concerns for the community. There are seven
features (Ref 12) of a cooperative company: voluntary association, open
membership, service motive, state control, democratic management, separate legal
entity and distribution of surplus.
● The differences between limited liabilities and unlimited liability (Ref 13) are limited
liability: that business owners are liable for any debts restricted to the amount they
put into the business. With unlimited liability the business owner is personally
responsible for any losses the business makes. Unlimited life means the company
would operate forever unless it is formally dissolved, limited liability protects the
person from being personally responsible for the business debts or legal judgments
against the company. The advantages (Ref 14) of unlimited liability in a business: is
more freedom which includes less compliance regulations to adhere to with unlimited
liability and potential tax savings depending on the level of profit which includes some
tax advantages to having unlimited liability by using non disclosure. Disadvantages of
unlimited liability it makes the owners legally responsible for all debts and business
which they risk personal assets and securing a loan can be more difficult due to
increasing risk. The disadvantages of a limited company are: complicated to set up,
complex accounts, accountancy costs, ownership and public records. The
advantages of a limited company are: tax efficient, limited liability, professional status,
company pension and maximising tax free income.
Unlimited Liability vs. Limited Liability
As shown in the table below.
Unlimited liability Limited liability
The owner's personal assets can be seized The owner's personal assets cannot be
to sell the financial obligations of the seized to sell any financial obligations of the
business. business.
Public
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