Business and law

SECTION 1:

Forms of business

Before you read

Discuss these questions.

1. What forms / types of business do you know?

2. What is a partnership?

3. What is a brand?

Key vocabulary:

market economy, sole trader, sole proprietor, limited/ unlimited company, to be liable for, liability, business assets, commencing trade, statutory requirements, VAT (Value Added Tax), PAYE (pay-as-you-earn), income tax deducting, shareholders, sharing profits, entity, professional bodies, statutory and financial control, pension provision, financial flexibility, expansion.

Read and translate the text:

Forms of business in the united kingdom advantages and disadvantages

As the United Kingdom is a country where market economy was established centuries ago, it would be interesting to look at British forms of business organization. The UK economy is mixed, that means that there exist both private and public sectors, the former being by far larger than the latter. Four major types of business represent the private sector: sole trader (sole proprietor, partnership, limited company and unlimited company. Limited companies in turn can be private limited and public limited. The public sector consists of nationalized companies. Let us review all of these forms in greater detail to identify their main features, advantages and disadvantages. The classification of business forms is illustrated by the following scheme:

Private Sector

Public Sector

Sole trader (proprietor)

Partnership

Limited c ompany

Unlimited company

Nationalized company

Private limited c ompany

Public limited company

Company limited by shares

Company limited by guarantee

Sole trader (sole proprietor)

The proprietor is the sole owner of a business and has full control of it. He is personally liable for all business debts, i.e. he carries an unlimited liability. This means that if his business fails, not only business assets are to be sold to cover outstanding debt, but also the owner's personal property. It is easy to start a sole trader's business at any time, as there are no legal formalities to complete before commencing trade. For a small business there are no statutory requirements for formatting accounting records and no need for an annual audit. In terms of taxes, sole traders may be required to register for Value Added Tax (VAT) and pay-as-you-earn (PAYE — a system of income tax deducting and National Insurance contributions for all organizations that have employees) purposes, and maintain corresponding records. They are required to submit accounts and tax computations to the Inland Revenue —a government agency that controls individuals' and companies' tax payments. Sole traders and partnerships are dominant forms in the small business segment.