Private enterprises

1. Sole traders are the life-blood of a market economy. Sole traders are common in retailing and local services like plumbing and catering. With local services demand limited, so the scope for expansion is also limited. The sole trader owns the assets of the business, makes all the business decisions, bears all the risks, and, of course, retains all the profits.

2. Partnerships are owned, and usually managed, by a small number of partners, each of whom can specialize in a particular aspect of the business. Decisions will be jointly arrived at, and the risks and rewards will be spread between the partners. In certain types of partnership, not all partners bear equal risks, and some partners may have a limited liability for business debts. Partnerships are common in professional and financial services such as: solicitors, estate agents.

3. Private Limited Companies (Ltd) are legally ‘incorporated’ firms, which means that they have their own legal identity, and are owned by shareholders who have limited liability for the firm’s debts (i.e. shareholders don’t need to use their personal property, such as house or car, to pay the company’s debts). Unlike sole traders and ordinary partnerships, limited, or joint-stock companies, are set up to take advantage of the principle of limited liability.

The rapid development of limited companies in the 18th Century provided a stimulus to the growth of private enterprise and the spread of free-market capitalism. This was because limited liability encouraged ordinary individuals to part their savings, and so provide finance for small or growing enterprises, without the risk of losing any more than the initial outlay. Today, private limited companies are common in all areas of economic activity in all sectors of the economy; from screenwriters and film producers, to restaurants and hotels.

In a limited company, shareholders appoint directors to take the key business decisions, though often the directors are also shareholders. Directors make decisions collectively as members of the Board of Directors.

Most of the significant risk taking is made by the Board of Directors, though day-to-day decision-making is devolved to professional managers.

4. Public Limited Companies (plc). Like private limited companies, public limited companies are also legally incorporated and are owned by shareholders who have limited liability for the firm’s debts, the difference being that ‘public’ companies are allowed to sell shares to the general public.

To enable them to ‘go public’, and ‘list’ their shares on the stock exchange they must satisfy strict criteria laid down by law covering the liquidity of the business, publication of financial accounts, and number of previous years trading.

The regulations governing public limited companies in the UK are increasingly complex, and this partly explains the recent trend towards ‘de-listing’ and returning to private limited status.

The main advantage of being a ‘plc’ is that it is much easier to raise funds because shares can be offered for sale to any member of the public. Shares can also be re-sold to other members of the public via stock exchanges, so it is easy for investors to regain their liquidity.

Despite the tough regulations, most large firms prefer to remain ‘plc’s, or their equivalent in other countries.

Дата добавления: 2015-10-29