Types of Business Enterprise: Sole Traders, Partnerships, and Companies

This report discusses the existence of three different types of business enterprise: sole traders, partnerships, and companies. It also explains the difference between two forms of share capital and two forms of long term debt in context with the long term sources of finance. The report uses Asda stores limited as an example of a multinational partnership business enterprise. It also highlights the importance of each type of business and their reasons for existence.

Types of business
Enterprise

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Why there is existence of three different types of business enterprise.......................................1
Difference between two forms of share capital and two forms of long term debt in context
with the long term sources of finance.........................................................................................2
CONCLUSION................................................................................................................................4
References:.......................................................................................................................................5

INTRODUCTION
Business are the commercial enterprise that produce and sell good and services to
customers in exchange of the monetary resources. The different business run different types of
operations and also has different ownership which has created the different forms of business
types in the business environment (Aagaard, Saari and Mäkinen, 2021). Generally, there are
three types of business enterprise sole traders, partnerships and the companies. The Asda stores
limited is the multinational partnership business enterprise. The company is the British leading
supermarket chain owned by the two brothers known as Issa brothers. The company is
headquartered at Leeds, England. The present report will highlight the existence of three
different types of business and two forms of share capital and long term debts in reference of
long term sources.
MAIN BODY
Why there is existence of three different types of business enterprise
Business enterprise exist in order to provide the people with the good and services they
need for the living, leisure and survival in result of which profits and earnings are generated
which develop a basic commercial life cycle of buyer and seller (de Silva 2020). The most
common three different types of business that exist in business environment and there reason of
existence is discussed below:
Sole traders: the business enterprise owned and operated by the single individuals with all the
profits and losses are incurred by the sole person is know as the sole traders. When any
entrepreneur thinks of starting a business it is always at a small scale with low investment for
which the most simplest and easiest form of business enterprise is sole traders (Ahmed and
Bhuyan, 2020). As with single ownership the person is not accountable for its profits or loss to
anyone and also there is not legal documentation or contract required to start or close the
business. As compared to other business types in this the owner has full control on the profits,
resources, decision making and assets which make them independent leader. Therefore, there is
existence of sole trader because owner is not answerable to anyone and feels like the one. For
example the NatWest Bank of UK is one of the sole trader banking enterprise of UK.
Partnership: the partnership is the form of business enterprise in which the there are two or
more owners of the business and their ownership for the business and its profits are abide by the
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legal contract of partnership (Ritter and Pedersen, 2020). There is existence of such business
because through the businesses are able to gain higher investment, better decision making and
helping hand to run the business smoothly. The major benefit of operating a business enterprise
in partnership is risk is divided and also the skill and characteristics of two different owners leads
to successful decisions in business. By this the opportunity of growth becomes higher and also
the business is managed more smoothly. The ASDA stores limited is example of such business
enterprise.
Companies: the companies are the legal entities formed by the bundle of people that has
common objectives in building a firm where they can work together on diversified field to attain
the goals and objectives of the company. This type of business enterprise are developed because
of their features such as owners does not have an liability for any loss the company is currently
facing. It just they work in company to meet the goal of develop the product and services that
can meet the customer needs (Musweu, 2021). Aviva plc is example of such type of business
enterprise.
Difference between two forms of share capital and two forms of long term debt in context with
the long term sources of finance
Share capital: these are the monetary value( money) that Asda raises by the issuing some high
return common and preferred stocks of the market (Cheng and et. al., 2020).
The difference between two most common type of share capital i.e. preference share and equity
share capital are outlined below:
Basis Equity share capital Preference share capital
Meaning The equity share capital
displays the level of the
ownership in the business
enterprise.
The preference share capital
are the one that come with
preferential rights when the
firm has to receive the
dividend or repaying the
capital.
Rate of dividends In this type of share capital the
rate are in stable as they
fluctuate as per the earnings
In this type of share capital the
rates are stable as they remain
fix.
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(Rahman and et. al., 2021).
Associated risk and burden In terms of long term sources
of finance The paying off of
the this share capital is not
necessary which keep low
burden on company as the
paying off completely depends
on the profit's earned by the
company.
In terms of long term sources
of finance, with this form of
share capital the Asda has high
burden as they are obligated to
pay the dividends to their
preferred shareholders
(Dzwigol, Dzwigol-Barosz
and Kwilinski, 2020).
Long term debt: these are the debt which get mature or flourish in more than a year and are
treated differentially from the short term debt.
The difference between two most common type long term debt i.e. preference share and equity
share capital are outlined below:
Basis Bonds Term loans
Meaning Bonds are the some kind of
loans in which instead of
borrowing the money through
a bank the borrower the money
from public in the form of
written documented sheet
known as bond (Kuter,
Gurskaya and
Aleinikov,2020).
The loans are the common
form of borrowing lended by
the banks.
Trading of a bond The bonds have high rate
trading as the person with the
bond can get the whole market
to conduct bidding for the
trading of the bond
This is form of loan which
provided by either bank or
single lender therefore they are
only required to paid back on
time (Camatte, 2020).
Type of interest The interest rates is not matter In term of loan the interest
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of concern in bonds are they
can either be fixed or variable.
rates are fixed for every month
that the person is required to
pay.
CONCLUSION
It is concluded from the above report that Also the different business enterprise has
different investment, ownership, operations depending on the size of the business. Also the
common reason for the existence of each type of business is to maintain the follow of all
essential good and services into the public to gain the profits. Also the share capital is something
that every company buys in terms of investment. On the other hand the long term debts like loans
and bonds are something that are issued for the purpose of growth, expansion etc.
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References:
Books and Journals
Aagaard, A., Saari, U.A. and Mäkinen, S.J., 2021. Mapping the types of business
experimentation in creating sustainable value: A case study of cleantech start-
ups. Journal of Cleaner Production, 279, p.123182.
de Silva, C., 2020. Business organizations. In Galbraith’s Construction and Land Management
Law for Students (pp. 65-76). Routledge.
Ritter, T. and Pedersen, C.L., 2020. Analyzing the impact of the coronavirus crisis on business
models. Industrial Marketing Management, 88, pp.214-224.
Musweu, F.K., 2021. The Importance of including Business Entities in the Introduction of any
Basic Accounting Programme. International Journal of Business Management Insight
& Transformations [ISSN: 2581-4176 (online)], 5(1).
Rahman, H.A and et. al., 2021. The Changing Aspect of Partnership Business Structure in
Malaysia. Jurnal Intelek, 16(1), pp.215-224.
Dzwigol, H., Dzwigol-Barosz, M. and Kwilinski, A., 2020. Formation of Global Competitive
Enterprise Environment Based on Industry 4.0 Concept. International Journal of
Entrepreneurship, 24(1), pp.1-5.
Camatte, J., 2020. Capital and Community: The Results of the immediate process of production
and the economic work of Marx (Vol. 24). Pattern Books.
Kuter, M., Gurskaya, M. and Aleinikov, D., 2020, May. Peculiarities of the Capital Account
Formation in the Period of Reorientation of Accounting to Double-Entry Method.
In International Conference on Integrated Science (pp. 69-80). Springer, Cham.
Cheng, F and et. al., 2020. Raising short-term debt for long-term investment and stock price
crash risk: Evidence from China. Finance Research Letters, 33, p.101200.
Ahmed, R. and Bhuyan, R., 2020. Capital structure and firm performance in Australian service
sector firms: A panel data analysis. Journal of Risk and Financial Management, 13(9),
p.214.
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