Different Types of Business Enterprise and Forms of Capital and Long Term Debt

Business Account

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
a) Explaining different types of business enterprise & why they exist.......................................3
b) Distinguishing between two forms of capital and two forms of long term debt....................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
New entrepreneurs faces difficulty while deciding the type of business they should start
and register with. It is important to evaluate factors affecting businesses and then take final
decisions. The present report will discuss the reasons behind existence of different forms of
business. Further, it will distinguish between two forms of share capital (equity shares and
preferences shares) and long term debt (bank loans and debentures).
TASK
a) Explaining different types of business enterprise & why they exist
Sole Traders
A sole proprietorship is like a company which is unincorporated and owner is one single
person. Though, it is the simplest form of business, but it offers minimum legal and financial
protection to the owner. However, formation of sole trader is a simple and easy task which does
not involve many legal formalities. Further, business operations are done with flexibility where
trader can make his own decisions without any interference and can easily adapt to changing
working environment (Dungan, 2017). A sole proprietorship business also exist because owner
has the power to effectively control the business activities.
Proprietor deals with many persons single handedly like suppliers, customers,
wholesalers, etc. and can control them effectively. Moreover, all activities are done under the
supervision of trader, so he can easily control costs and expenses which leads to economies of
operations. Sole proprietorship business is also good enough to carry on because the owner
handle operations which also lad to business secrecy of technical know-how, effective
production process, the cheapest source of raw materials, etc.
Popular sole traders include freelancers like designers, photographers, selfemployed-
people like builders, plumbers, etc.
Partnership Business
This form of business involves two or more people who distribute all profit and losses in
proportionate manner. A partnership business exist because it is inexpensive and easy to
establish with less reporting requirements. It should be register if total turnover is more than
$75000. This type of business has its own benefits due to which it exists like it decreases burden
of managing all tasks on person and provides access to additional resources and funds. Further,