SC3 – Business Organization Lim Sei cK

Different types of business organization Sole proprietorship Partnership Limited company

Sole proprietorship Most businesses in the Brunei are small businesses, owned and operated by one person. These businesses operate as a “sole trader”. Many traders in the service sector (e.g. hairdressers, gardeners, plumbers and electricians) use the sole trader option, as do people who run part-time or seasonal businesses.

Why is the sole trader such a popular form of business organization? The key reason – it is simple and cheap to set up and operate in this way.

Sole proprietorship Being a sole trader is the simplest way to run a business: -it does not involve paying any company registration fees; -keeping records and accounts is straightforward, -the sole trader gets to keep all the profits.

The sole trader simply registers as being “self- employed”. The profits earned by a sole trader are included in the personal income of the business owner.

Partnership A partnership is a business where there are two or more owners of the enterprise. Most partnerships are between two and twenty members.

A partner is normally set up using a Deed of Partnership. This contains: Amount of capital each partner should provide (i.e. starting cash). How profits or losses should be divided. How many votes each partner has (usually based on proportion of capital provided). Rules on how to take on new partners. How the partnership is brought to an end, or how a partner leaves.

The advantages of remaining a partnership rather than becoming a private limited company are: Costs money to set up limited company (may need to employ a solicitor to set up the paper work). Company accounts are filed so the public and competitors can view them. When a partnership finishes then, each partner has an agreed slice of the business. [Shared profit]

Limited Company Incorporating business activities into a company confers life on the business as a "separate legal person ". Profits and losses are the company's and it has its own debts and obligations. The company continues despite the resignation, death or bankruptcy of management or shareholders.

There are four main types of company: (1) Private company limited by shares (2) Private company limited by guarantee (3) Private unlimited company (4) Public limited company (PLC) PUBLIC = BERHAD PRIVATE = SENDIRIAN BERHAD

Activity for the day [In a group of 3] List two advantages and disadvantages: A.Sole proprietorship B.Partnership C.Limited company