Types of business enterprise and comparison of long term sources of finance for public limited company

This report discusses the existence of different types of business enterprises such as sole traders, partnerships, and companies. It also compares two forms of share capital and long term debt in the context of long term sources of finance for public limited companies. The report provides examples and definitions of each type of business entity and source of finance. The subject is Accounting for Business and the course code and college/university are not mentioned.

Types of business enterprise

Table of Contents
Task 1............................................................................................................................4
Existence of different types of business enterprise...................................................4
Task 2............................................................................................................................5
Comparison between two form of share capital and two form of long term debt in
context of long term sources of finance of public limited company.........................5
Conclusion:...................................................................................................................7
References.....................................................................................................................8

Introduction
Business enterprise is a business entity that is established by the person when they see any opportunity.
The person who established the business is known as entrepreneur. Enterprise are those business entity
which manufacture or sale various types of goods and services. They are set so that they can earn profit
from it. There are different types of enterprise such as sole trader, partnership, private limited company
and public limited companies. Here the entrepreneur takes risk to run the business (Barane and Hake,
2018). Business enterprise can be big or small, there is no predefine scale. The complexity to manage the
business activity depends upon the size of the business. So, managing the enterprise is also important and
requires wide range of activity. In this report the topic which will be covered are existence of different
types of business enterprises and the comparison between the two type of share capital and long term debt
(Brown, 2018).
Task 1
Existence of different types of business enterprise
There are three types of business enterprise that are sole traders, partnership and the companies. The
function of all the enterprise is different and work in different way. The three enterprises exist in the
business is because of their size and scale of operations. Let discuss each one by one:
a) Sole traders: A sole proprietorship is a incorporate business entity that is owned and mange by
the single person. This type of entity is the most simplest. This type of entity exists because there is
no need to form a separate entity for the business. These also offer less degree of legal and financial
protection to the owner. The owner of the business is the person who is liable for all the liabilities
and the losses. This type is creating for those people who want to have full control over the
business and do not want to share the profit that incur while doing operations. In this type the
owner also get the tax benefit as their personal income is only considered as a income of the
business and tax is paid on it only ( Xu, Chen and Wang, 2020).
Example of this type of business entity is local General store, beauty parlour, sweet shop, freelancer etc.,
are the person who owned the business as a single individual.
b) Partnership: A partnership is that type of business entity that is owned and run by two or more
person who is known as the partners. They also enjoy the benefit of tax as the partners personal
income is only considered as business income and tax is paid on that amount. This entity exist so

that liability of the firm can be share among them and the profit of the company is share in the
proportion of capital invested by each partner.There are three type of partnership (Kim, Lee and
Sohn, 2020).
a) General partnership: this is one of the most simplest partnership here the liability is
unlimited. It means the partners personal asserts can be used to pay the debts.
For example: Leah and David are two partners who signed general partnership agreement.
So in case if any fraud is done by Leah then David personal assets are also used to pay the
debt according to the law.
b) Limited partnership: In this act there is one person only who act as an general partner
and the rest partner is not involved in any decision making process. And th liability to pay is
limited to one person only (Robison, 2021).
Professional services like dentist, accountant are come in this category.
Example of partnership business are Red Bull and Go pro, Spotify and Uber etc.
c) Companies: there are two types of limited company these are Private limited company and
Public limited company. The private company is those who is owned any control by the person and
government has no control over it. This company does not trade on stock. The public limited
company is control by the government body and are on stock (Yin and Burke, 2020).
These company has separate entity from there owner and the tax is paid on the basis of the income earn
by the company. The owners are also divided upon the share they earn. This business entity exist when
they want to do business on large scale and want a separate entity.
Example of companies are: Apple, Wall mart etc.
Task 2
Comparison between two form of share capital and two form of long term debt in context of long term
sources of finance of public limited company.
Two type of share capital
Basis Equity share capital Preferences share capital

Meaning Equity share capital is those
amount of money that is
contributed by the owner or the
investor of the company
towards the capital they pay.
Capital that a public company
raises through selling the
preference share (Hilorme and
et. al, 2019).
Dividend rate There is no fixed divided to
pay in this capital
The dividend that is fixed in
rate
Voting right This capital gives voting right
to the holder of the share
This capital does not provide
any voting right.
Bonus share This capital provides the right
to receive bonus share
Bonus share on this capital is
not received.
Long term debts:
Basis Loans Bonds
Definition A loan is an debt instrument
that is provided by the bank to
the public company with a
variable rate of interest.
It is that type of long term debt
instrument which is used by the
public limited company to raise
capital by selling IOUS.
Interest rate The rate of interest in this
higher
There is slightly low rate of
interest that is paid on this
Source place Loans are sanctioned by the
banks mostly (Mateo, 2018).
Bonds can be sold in the
market or through public
institution.

Conclusion:
In this report it is been concluded that there are three types of business entity which is set up with
different characteristic. The tax pay on them also depend upon the type of business. It is also been seeing
that there are various type of long term share capital that is authorised capital, issued capital, paid capital
but in this equity and preference share capital is discussed. Long term debt of public limited company is
loans and bonds and the comparison between them is also done in this report.

References
Brown, R.A. ed., 2018. Chinese business enterprise in Asia (Vol. 7). Routledge.
Barane, A.I. and Hake, E.R., 2018. The institutionalist theory of capital in the modern business
enterprise: appropriation and financialization. Journal of Economic Issues. 52(2). pp.430-
437.
Xu, B., Chen, X. and Wang, Y., 2020. A new dynamic classification of enterprises for
implementing precise industrial policies. Journal of Business Research. 118. pp.463-473.
Kim, H.J., Lee, B.K. and Sohn, S.Y., 2020. Comparing spatial patterns of sole proprietorship
and corporate payday lenders in Seoul, Korea. The Annals of Regional Science. 64(1).
pp.215-236.
Robison, L., 2021. Alternative Forms of Business Organizations. Financial Management for
Small Businesses, 2nd OER Edition.
Yin, G.K. and Burke, K.C., 2020. Partnership Taxation. Wolters Kluwer.
Hilorme, T., and et. al, 2019. Human capital cost accounting in the company management
system. Academy of Accounting and Financial Studies Journal. 23. pp.1-6.
Mateo, J.P., 2018. The accumulation of capital and economic growth in Brazil: a long-term
perspective (1950–2008). Review of Radical Political Economics. 50(2). pp.370-391.