Types of Business Organizations: Sole Proprietorship, Partnership, LLP, and Limited Company

Business Organizations
TABLE OF CONTENT
INTRODUCTION...........................................................................................................................2
MAIN BODY..................................................................................................................................2
Types of business organization:...................................................................................................2
Sole proprietorship.......................................................................................................................2
Partnership...................................................................................................................................3
Limited liability partnership (LLP).............................................................................................4
Limited company.........................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
1

INTRODUCTION
Business law is well known as commercial law is legal body that govern business
organization; this law is mainly concerned with legal formality of a company that need to be
fulfilled. Every country have their own commercial law which allow them to manage corporate
contacts of business, business law is wide term which include law for employment, law for
contracts, law for dealing in market and formation law (Davies, 2020). This report will discuss
different types of business organization such as sole trader, partnership, limited liability
partnership and limited company. This report will provide clear understanding of legal
requirement in starting any type of business.
MAIN BODY
Types of business organization:
Every business organization is connected with one type of organizational structure which
allow them to understand their business process, size of business decide which type of structure
will suit their business operation (Cappellino, 2020). Sam who is sole proprietor want to expand
their business, there are different type available for them to chose one, different type these are:
Sole proprietorship
Sole proprietorship is one of the most common type of business organization which can be
found in small scale company, in this type, sole ownership or single person operate business
operation and deal in the market (Dungan, 2017). These independent entrepreneurs run business
in simplest form, profit and loss is solely controlled by entrepreneur as there is no partner so
these sole owner do not have to divide their profit into ratio. There are certain benefit and
drawback of sole proprietorship:
2

Total control: sole means alone, these type of business organization have single owner who
enjoy benefit of company, entrepreneur in this type have total control over every level of
business which means decision are taken by single person.
Unlimited liability: it is very clear that if single owner is enjoying all benefit of business then
they have to face losses as well, decision of these owner decide growth of the business which
means if decision are not right then they have to bear losses. Personal need of sole owner
increase debt for business result in failure.
Legal requirement: a sole trader do not have any legal requirement to start a business but there
are certain responsibility which need to complete in their business process, these are:
Self employment: according to government of UK, sole trader have to prove that they are self
employed by registration in one of the government policy for example; Tax Free Childcare
(Brown, Liñares-Zegarra and Wilson, 2018). These sole proprietor need to claim that they are
sole trader and will trade fairly in market of UK, apart from this sole trader have to completed 2
National Insurance Payment policy under rule of HMRC (Her Majesty’s Revenue and Custom).
VAT registration: if business of sole proprietor have turnover of 85000 euro, then they have to
register their business in VAT regulation. This will keep their business safe from any kind of tax
issue while dealing in the market.
Partnership
Partnership is another most common type of business organization which allows two
people to form a contract of business under law, this type of suitable for medium scale business
firm who want to expand their business (Rahman and Ghadas, 2018). A sole proprietor only
chooses partnership if they want to expand their business which means Sam have best
opportunity to form partnership with investor or with those business organization who deal in
same industry with same business size. For IOM solution of Sam, partnership will be best for
them because in partnership, they will not only going to get investor but they will have new
advisor which will advice them in their business decision making process. Partnership have
unlimited benefit which will benefit Sam and IOM solution.
There are certain benefit and drawback of partnership, these are:
Investor: partnership is only formed on the basis of investment, new partner need to assist
business with investment activity. Partnership is very beneficial for sole proprietor like Sam who
3