A sole proprietorship is a business that is owned and operated by a natural person (individual). This is the simplest form of business entity. The sole proprietorship is not a legal entity. The business has no existence separate from the owner who is called the proprietor.
Typical sole traders include the man-in-a-van type of occupation such as a capenter or electrician. However, the term can also apply to people who run small, web-based businesses from home.
This is the simplest and the most common type of business out there. The sole proprietor is responsible for everything the business does. You trade under your own name, with no separation of assets and liabilities. This means that you’ll be held personally liable for any debts that the business incurs.
A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labour or skill, and expects to share in the profits and losses of the business.
Partnerships are typically found in professional services such as accountants, lawyers, doctors, dentists etc, where the partners can share expertise and skills. They can also share the workload, organising work rotas to allow for time off and holidays. Partnerships comprise two or more people and any profits, debts and decisions related to the business are shared.
A company is a legal entity made up of an association of persons, be they natural, legal, or a mixture of both, for carrying on a commercial or industrial enterprise.
Companies are owned by shareholders who each put an amount of money into a central pool. This pool of capital is then added to by borrowing and other forms of finance. Directors run the company on behalf of shareholders, who receive a share of the profits. Each shareholder receives a portion – or share – of the company that is equivalent to what they put in.
A company is seen as a legal entity that is entirely separate from the shareholders.
A franchise in its’ simplest form is an agreement or license entered into by two parties, the franchisor and the franchisee.
Franchises are licensing arrangements whereby an individual or group can buy the right to trade and produce under a well-known brand name in a given locality. A franchise involves you using another company’s successful business model – and name – to establish your own business. The franchisee benefits from working for themselves while having the privilege and reputation associated with a much larger group.
Limited liability is a type of liability that does not exceed the amount invested in a partnership or limited liability company. The limited liability feature is one of the biggest advantages of investing in publicly listed companies.
Limited liabilities are intended to benefit professional partnerships such as lawyers, doctors etc. They offer a form of business protection for company shareholders and some limited partners. For these individuals, the maximum sum they can lose from a business venture that goes under, is the sum of money that they invested in the company.
Limited liability allows the members to limit their personal liability if something goes wrong with the business.