Types of Business Enterprises and Long Term Sources of Finance for Listed Companies

This report covers the three main types of business enterprises which can be used by the entrepreneurs to start a business. The report further talks about how these business enterprises can be financed and can work efficiently with the funds provided. It also critically compares the two forms of share capital and long term debt with reference to the long term sources of finance available for listed companies.

Accounting for
Business

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
What are the different types of business enterprises and why do they exist. Explain using
examples......................................................................................................................................3
Critically compare the two forms of share capital and long term debt with reference to the
long term sources of finance available for listed companies......................................................4
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
A business organization is a type of entity that is concerned in providing the consumers with
goods and services with the primary content of earning a profit. It is applied to every other firm
who deals in commodities or services to be sold and from which they earn a profit (Soto-Acosta,
Del Giudice and Scuotto, 2018). This report covers the three main types of business enterprises
which can be used by the entrepreneurs to start a business. The report further talks about how
these business enterprises can be financed and can work efficiently with the funds provided.
TASK
Business refers to an entity that is formed specifically to deal in the commercialism of goods and
services in the view of gaining profit. These are done on commercialized basis to the customers.
Most of the enterprise exist to gain a return and these are counted as the profit for the business
owners (Ling, 2018). Profit is the reward for risk taken, which means that profit is in reality a
kind of payment that is earned by the business owner in taking the risk to spend in the business
and carrying off its everyday actions. Here comes a distinction in the functions of different
business. As the owners have diversified roles, this makes the basis for different business
enterprises. There are three types of business enterprises and these will be discussed further
What are the different types of business enterprises and why do they exist. Explain using
examples.
Sole Proprietorship is the simplest kind of business organization as it is owned and governed by
a single individual known as sole proprietor. It is a type of business enterprise which is owned by
one person only. Sole proprietor comes into existence as the owner wants to invest small capital
and manage a small scale of business. All the decision-making knowledge regarding the business
lies in the hand of this single person called sole proprietor (Negedu Ameji, and et.al., 2020). The
owner has unlimited liability. Example of sole proprietorship is, barbershop, sweet shop etc. In a
sole proprietorship business, liability of the firm can be unlimited and proprietor suffer every
loss of the business even owner's private property is liable for the obligations occurred. As
decision makers of the business is their owners who is in position to maintain all the business
affairs and secrecy to himself.
Partnership firms is other type of business enterprise in which the ownership is divided among
various people who in business terms are called partners. These people have the objective of

investing medium level of funds individually. They invests in the enterprise jointly and manages
the daily activities of the business. This business can be divided into two subgroups- general
partnership and limited partnership. Example of this is yoomoo, whatsapp. Every partner have a
risk of unlimited liability for all the liabilities of the business (Yung, 2019). No partner have a
right to share its partnership with other person or include another partner in the company without
the consent of the other partners. Legal Partnership deed is required to avoid later conflicts
Public Limited Company is a type of company which can legally offer its stock to sell to the
general public. The management in the business is responsible to manage the daily activities. In
order to start a public limited liability business there are some particular obligations that a PLC
needs to follow. Example of this is Amcor Plc, Associated British Foods Plc. Company has a
separate legal entity from individuality of its shareholder or partners. Shareholder can easily
transfer their stock to the public whenever they want. Shareholders liability is limited in
according to the shares owned by them.
Critically compare the two forms of share capital and long term debt with reference to the long
term sources of finance available for listed companies.
Long term sources of finance are those sources where the business can fund its long term
monetary requirements. Banks and other financial institutions lend these funds to the business.
These long term financing can be raised either in form of share capital or debts.
Share capital is that wealth that a company raises from the public by issuance shares to them.
Organisations pays dividend on them on earning profits and shareholders are treated as owners of
the organisation (Schieber, 2017). Whereas on the opposite side, debt are the finances that a
business owes to the people and pays fixed interest on them after a certain time period. They are
not the owners of corporation. They both are divided into two types which are discussed below:
Types of Share capital
 Equity Shares- These shareholders are considered as the owners of the firm and enjoys
voting rights in the business. The rate of dividend varies for these shareholders and is
dependent on the profits earned by the company.
 Preference shares- The rate of dividend is fixed for these shareholders and they enjoy
the preference over the earnings in comparison to equity shareholder. These shareholders
do not enjoy any voting rights in the business. This feature helps the firm in strengthening
its position as the control remains in the hands of management only.

Types of Debts
 Bonds- These refers to the loan securities that are issued by the company against some
physical asset. The main advantage of this source of financing is that it can be sold or
bought back to satisfy the liquidity measures of the business. But they highly volatile
ones because their process keeps on changing very fast (Mol-Gómez-Vázquez and et.al.,
2020).
 Debentures- These are loans without any kind of security, the rate of interest of these
loans are fixed and the business has to pay them and consider them as actual cost. The
main advantage of this is that it is a long term loan and can be paid back after a long time.
CONCLUSION
From the above mentioned report it can be concluded that a business enterprise can be divided
into three types. The selection of the type of business depends on the requirement of the
individuals and scale on which its is going to be operated. The report also highlights how long
term funds can be acquired by the firm from different sources.

REFERENCES
Books and Journals
Ling, S.L.M., 2018. The transformation of Malaysian business groups. In Southeast Asian
Capitalists (pp. 103-126). Cornell University Press.
Mol-Gómez-Vázquez, A., and et.al., 2020. Economic and institutional determinants of lease
financing for European SMEs: An analysis across developing and developed
countries. Journal of Small Business Management, pp.1-22.
Negedu Ameji, E., and et.al., 2020. Covid-19 Pandemic And Performance Of Small And
Medium Scale Enterprises (Smes) In Lokoja, Kogi State, Nigeria. Ilorin Journal of
Economic Policy. 7(3). pp.41-50.
Schieber, S.J., 2017. Generational equity and Social Security financing reform. The Journal of
Retirement. 5(1). pp.12-31.
Soto-Acosta, P., Del Giudice, M. and Scuotto, V., 2018. Emerging issues on business innovation
ecosystems: the role of information and communication technologies (ICTs) for
knowledge management (KM) and innovation within and among enterprises. Baltic
Journal of Management.
Yung, C., 2019. Entrepreneurial manipulation with staged financing. Journal of Banking &
Finance. 100. pp.273-282.