Different Business Enterprises and Long Term Sources of Finance

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 discusses 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 business enterprises and why do they exist in the market. 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 enterprise is a type of entity that is involved in providing the consumers with goods
and services with the main goal 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 (Cogswell, 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
What are the different business enterprises and why do they exist in the market. Explain using
examples.
Business refers to an individual entity which ids formed with the help of different regulations but
the main aim of these entities is to serve its customers with the main purpose of earning profits.
These are done on commercial basis to the customers. Most of the organization survive to gain a
return and these are registered as the profit for the business owners. 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 (Garzella
and et. al., 2019). Here comes a distinction in the functions of different business. These business
are different in the working, needs and wants. If a owner want to start a small scale business with
low capital, they might want to go for sole proprietorship. If the entrepreneur wants to go for a
middle scale business with medium level of capital investment, they might want to go in
partnership with different individuals with similar interests. If an owner want to go for a long
term investment with larger share capital they will invest in big corporations. There are three
types of business enterprises and these will be discussed further:
Sole Proprietorship is a type of business organization which is closely-held by one person
only. This is the simplest kind of business organization as it is owned and governed by a single
individual known as sole proprietor. Sole proprietor comes into existence as the owner wants to
invest small capital and manage a small scale of business (Lee, 2020). All the decision-making
knowledge regarding the business lies in the hand of this single person called sole proprietor.
The owner has unlimited liability. Example of sole proprietorship is, electronics repair shop,
dairy goods 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.
Partnerships business 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 (Matthies, and et. al., 2019). This business can be
divided into two subgroups- general partnership and limited partnership. Example of this is
casper & west elm, Apple and MasterCard. Every partner have a risk of unlimited liability for all
the liabilities of the business. 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 TESCO Plc., UNILEVER 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.
Types of Share capital
 Equity Shares- The holders of these shares are known as the owners of the firm and have
voting rights in the firm. The rate of divided varies for them and is dependent on the
profits earned by business along with the decision taken by management (Tanaka, 2021).
 Preference shares- The rate of dividend is fixed for these shares and they enjoys the
right of preference in earning dividend over equity. But they do not hold any voting rights
in the firm. This feature helps the firm in strengthening its position as the control remains
in the hands of management only
Types of Debts
 Bonds- These are the loans that are issued by company by securing them against some
physical asset. The main advantage of this source is that it can be sold out any time for

satisfying the cash needs of the firm. But they highly volatile ones because their process
keeps on changing very fast.
 Debentures- These are type of loan but without any kind of security. The rate of interest
for them is fixed and companies are obliged to pay them irrespective of the fact that
organisation is earning profits or not (Tetrevova, Patak, and Kyrylenko, 2020.). Its
biggest benefit is that it can be arranged for long time period.
CONCLUSION
From the above mentioned report, it can be concluded that different business enterprises exists
for different motives. 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. These are share capital and long
term debts.

REFERENCES
Books and Journals
Cogswell, J.E., 2018. Share and Share Alike: The Influence on Team Psychological Capital and
Outcomes (Doctoral dissertation, University of South Alabama).
Garzella, S., and et. al., 2019. The (in) coherence in accounting for goodwill: Implications for a
revision of international accounting standards. Meditari Accountancy Research.
Lee, G., 2020. Does CEO inside debt promote corporate innovation?. Finance Research
Letters. 37. p.101362.
Matthies, L.M., and et. al., 2019. The influence of partnership quality and breastfeeding on
postpartum female sexual function. Archives of gynecology and obstetrics. 299(1).
pp.69-77.
Tanaka, M., 2021. Formalization of manufacturing firms in Bangladesh. Review of Development
Economics.
Tetrevova, L., Patak, M. and Kyrylenko, I., 2020. CSR web communication in controversial
industries: The example of chemical companies based in post-communist
countries. Journal of Promotion Management. 27(4). pp.562-584.