Types of Business Enterprises

Date: October 1, 2008


Assignment 1


Describe and explain the recognised types of business enterprises.   What are some of their advantages and disadvantages when seen from the viewpoint of a proprietor or manager?


Introduction

In English Law, a business enterprise may be described as having the status of a “sole trader”, a “partnership” or a “company or corporation”.
The type of legal structure adopted for a business will have a considerable impact on the liability of the owner and any fellow owners and on the type and amount of tax that may have to be paid. I will attempt to discuss the above in this paper.


Types of business enterprises

Sole Trader

A sole trader is a business owned and operated by one individual though it could have a number of employees and is the most common structure for people starting out in business. Personal capital is normally used to set up. The business affairs are not dealt with separately from personal affairs and the proprietor does not need to register with any government bodies. A lot of small businesses are sole trades as there are very few legal formalities, obligations or constraints and the books and records that need to be kept are fairly straightforward. Business stationery must include business address and proprietor’s name. The proprietor must keep accurate and full records of income for the Majesty’s Revenue and Customs and records should be kept for at least six years. If the business is to be VAT registered, VAT transactions should be recorded. The books of a sole trade business should show
    • Payments
    • Receipts
    • Credit Purchases
    • Credit Sales
    • Business Assets and Liabilities
A sole trader is obliged to inform HM Revenue & Customs within three months of operating the business and is also obliged to pay Class 2 and 4 National Insurance contributions. All business income and personal income will be taxed and needs to be declared on the owner’s personal tax return....