Private Limited Company Essay Example

Private Limited Company Paper Being a sole trader is the easiest and most common form of business to set up. If Donald Powell decided to operate as a sole trader, he would be the owner and manager of his own business. Being a sole trader has its advantages and disadvantages.  If Donald Powell were to become a sole trader, he would receive all of the profits his business has generated. Donald Powell, as a sole trader, would also be able to make all of the decisions in his business.  Privacy is also an advantage for Mr Powell as all business affairs would remain private.  As a sole trader, Donald Powell can quickly change trade if his previous one proves to be unsuccessful. This can happen overnight.  However, there are also some disadvantages to being a sole trader. Unlimited liability is one of them. Ultimate responsibility for any debts will lie solely with Donald Powell. This would have to be repaid by his wealth or personal possessions. Since it is very unlikely that any single individual will posses all the required qualifications and business acumen to a run a successful enterprise, Donald Powell may find it impossible to compete with traders employing people specialising in different aspects of the trade.  As a sole trader, Donald Powell may find the responsibility of owning, managing and working the business a heavy burden.  Working hours may also be a disadvantage as Donald Powell would be likely to have to work long hours. We will write a custom essay sample on Private Limited Company specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Private Limited Company specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Private Limited Company specifically for you FOR ONLY $16.38 $13.9/page Hire Writer If Donald Powell was to become sick or was to die, the business may collapse.  The last disadvantage would be lack of growth. It would be difficult for Donald Powells business to grow, as the money invested in the business (capital) is likely to be very limited.  If Donald Powell was to operate as a sole trader, he would experience a lot of advantages such as receiving all of the profit, making all of the decisions e.t.c. He also has a lot of serious disadvantages such as not being able to advertise his shares, lacking business skills e.t.c. E.g. If Donald Powell lacked necessary business skills, he would find it very difficult to cope and be successful. This is why I have come to the conclusion that this type of business is unsuitable for Mr Powell. Forming a partnership with at least one person and a maximum of twenty can lessen some disadvantages experienced by a sole trader (Donald Powell). This is a popular type of business. This type of company has many advantages and disadvantages.  Each partner will invest capital into the business and this will increase Donald Powells business financial resource.  Partnerships can take advantages of larger scale businesses opportunities. This is a good advantage for Donald Powell  The responsibilities of the business would be shared between all of the owners known as partners. This would take a little weight off Mr Powells shoulders. In a partnership, business affairs would remain private between the partners. This could increase Donald Powells business awareness as well.  With several partners working within the business, each one can specialise in what they are best at e.g. accountancy e.t.c (Speacialition increases productivity) This could be very useful for Mr Powell as he may lack some business skills. Therefore, he can do what he is best at.  There are four main disadvantages to being in a partnership. The first one is unlimited liability. All partners are equally liable for any debts the business builds up. Therefore, Donald Powell can lose all of his personal wealth and possessions to repay debts. With shared decision-making, there is always a likelihood of Donald Powell or any of the other partners disagreeing to someones decision. However, this can be solved with a legal document called a Deed of Partnership. This outlines how decisions should be made, profits shared e.t.c  As the number of partners is limited, so is the capital. This can hinder the business growth. This is a disadvantage for Donald Powell. I think operating in a partnership would be quite a good choice of business for Mr Powell as it has many advantages such as specialisation, more capital e.t.c However, there are also a few disadvantages such as disagreements, unlimited liability e.t.c And although it seems that the advantages outweigh the disadvantages, I still think this is not the most suitable type of business for the needs of Donald Powell. If Donald Powell decided to operate as a plc, (public limited company), he would be the owner and manager of his business perhaps along with a few other people. Being an owner of a plc has its advantages and disadvantages.  The liability of the owners such as Donald Powell to pay the debts of the company is limited only to the money invested in shares. This would encourage share ownership, as Donald Powells personal wealth is kept secure, should the company fail. Shares can be advertised and sold through the stock exchange. The shares can be sold to any member of the public. This can allow Donald Powell to raise a vast amount of capital.  If Donald Powell made a mistake which proved to be very serious, his business would be sued, not Donald Powell himself.  As Donald Powells business becomes larger, there will be a lot more scope for specialisation. Specialist in different jobs could be employed. Employees will concentrate on only a few tasks they are good at. Not only will this allow Donald Powells business to run things much more efficiently, but also Mr Powell will not need to worry whether he lacks certain business skills. (Specialisation increases output). As Donald Powell will be running a larger business, banks will be more willing to lend larger business loans, as he will be likely to repay them on time. Loans with a lower rate of interest may be obtained. As Donald Powells business will be a lot larger, he will be more likely to buy things in bulk. Hence, the unit cost of production will fall. (Get cheaper).  Any owner that purchases more than 50% of the companys shares can be said to have taken over the business. This can happen anytime if shareholders (such as Donald Powell) are willing to sell their shares. E.g. BMW mounted a successful take over of Rover. Large businesses can be difficult for Donald Powell to control and manage leading to inefficiencies e.g. managers wasting money and leading to disagreements and industrial action. This can lead to rising unit costs in production known as diseconomies of scale.  Donald Powells interests e.g. growth, market share may differ from shareholders interests e.g. profit leading to higher dividends  The setting of a PLC is time consuming and costly.