Business Enterprise Types: Share Capital and Long-Term Debt Forms

This report provides an overview of different types of business enterprises, including sole proprietorships, partnerships, and limited liability companies, highlighting their respective advantages and disadvantages. It further distinguishes between two forms of share capital: common stock and preferred stock, outlining their characteristics and suitability for different investors. Additionally, the report differentiates between two forms of long-term debt: loans and bonds, examining their interest rates, tradability, and examples. The report concludes that understanding these different types of enterprises and financing options is crucial for effective business management and achieving organizational goals. Desklib provides this assignment as a study resource, along with many other solved assignments and past papers to aid students in their studies.

Types of business enterprise

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Three different type of enterprise................................................................................................3
Distinguish between two forms of share capital and two forms of long term debt.....................4
CONCLUSION................................................................................................................................5
REFERNCES...................................................................................................................................6

INTRODUCTION
There are different types of enterprises such as, individual proprietorship, partnership,
limited liability companies. All the enterprises are having some advantages and disadvantages.
Before starting a venture, it should be decided that what type of enterprise they have to start. The
report examines, three different type of business enterprise. Further, distinguish between two
forms of share capital and two forms of long term debt related to long term sources of finance of
listed public limited company.
MAIN BODY
Three different type of enterprise
There are different types of enterprise like, sole proprietorship, partnership and limited liability
company. It depends on a person which type of enterprise they want to adopt and want to run
business. It is essential to make plans and on the basis of that enterprise should be started.
Sole proprietorship- it means a type of unincorporated entity which is owned and managed by
an individual person. In this only a single person is doing business and handling all issues alone.
Advantages of sole proprietorship are, it has less paperwork, easier tax setup, fewer business
fees, straight forward banking (Okafor and Akwu). Sole proprietorship has simplified business
ownership, no liability protection. An individual person is handling all problems and managing
work properly so that goals and objectives can be achieved. Sole proprietorship is the business in
which there are less legal requirements and not much documents are started.
It can be start by an individual person and all the profit and loss is of single person. There are
some disadvantages of sole proprietorship i.e., limitation of management skills, limitation of
capital, unlimited liability, lack of continuity because an individual person faces problem in
handling all the work. In this there is weak bargaining position, limited scope for expansion, risk
of taking wrong decisions, no large scale economies. Sole proprietor is handling all issues and if
profit is earned then it is of sole proprietor.
Partnership- it means a formal agreement between two or more parties so that manage and
operate a business and share profit and loss. There are different type of partnership arrangement.
In this partners are sharing profit and loss equally, handling all the work equally and managing
work so that they can accomplish goals and objectives. There are some advantages of partnership
like, it helps in bridging gap in expertise and knowledge, more cash is required, helps in cost
saving. Partnership helps in more business opportunities and better work life (Syrbu and

Kvintyuk, 2019). It provides moral support and new idea can be generated. When partnership
enterprise is applied then it is beneficial for partners as they do not have to pay tax. In this work
is divided among partners and agreement is made which helps in achieving targets. There are
some drawbacks of Partnership like, loss of autonomy, emotional issues, liabilities, lack of
stability and future selling complications. When doing business in partnership there are some
issues which arise between partners. It is important to make agreement and work accordingly so
that there will be no issue and all the activities are managed properly.
Limited liability companies- it means a business structure for private companies. In this all
partners are responsible for business and unlimited liability for business debts. Advantages of
limited liability partnership are, it is convenient, no minimum capital requirement, no limit of
owners of business. In this lower registration cost, saving from lower compliance burden,
taxation aspect on limited liability partnership. In this there is no requirement of compulsory
audit and work can be completed on time (Aspan, 2017). disadvantages of limited liability
company is in this fees and taxes associated with business structure. It is difficult to manage all
the activities and work will not be completed on time.
Distinguish between two forms of share capital and two forms of long term debt
Two forms of share capital are, common stock and preferred stock.
Basis Common stock Preferred stock
Meaning It means a security which
represents ownership in a
corporation and vote on
corporate policies (Boller and
Morton, 2020).
It means company stock with
dividend that are paid to
shareholders (Park, Choi and
Choi, 2019).
More suitable for Common stock is suitable for
long term growth investors.
Preferred stock is used by high
yield dividend investor.
Number of classes of stock In this usually one number of
classes of stock but sometimes
it can be more if there is a
need for special voting right.
In the preferred stock, often
multiple number of classes of
stock is used and there is no
limit on how many a company
can issue.
Voting rights In this voting right is given to In this shareholders are not

shareholders. having voting rights.
Two forms of long term debt are, loans and bonds. There are forms of long term bonds which is
beneficial in long term sources of finances and this helps in running business smoothly. These
sources can be used by companies so that work can be completed on time and there will be no
issue in achieving goals and objectives. It is essential to use sources of finances so that targets
can be achieved and it helps in performing better than others. When sources of finance is used
then it becomes easy for managers to manage work and goals of organisation can be
accomplished.
Basis Loans Bonds
Interest rate Loans are given at fixed rate
of interest or variable interest
rate.
Bonds are given at low
interest rate.
Tradability Loans are not tradable in any
market.
Bonds are traded on the bond
market and over the counter.
Examples Mortgage loans, car loans,
credit card loan etc.
Treasury bonds, zero coupon
bond and corporate bonds.
CONCLUSION
From the above discussion it can be concluded that, there are different type of enterprises
such as, sole proprietorship, partnership and limited liability company. Advantages and
disadvantages of different type of enterprises has been discussed. Further, distinguish between
two forms of share capital i.e., common stock and preferred stock has been described. Difference
between form of long term debt i.e., loans and bonds has been discussed.

REFERNCES
Books and Journals
Okafor, R. G. and Akwu, O. D., COMPARATIVE ANALYSIS OF INCOME TAX BURDEN
ON THE INCOME ARISING FROM INCORPORATED COMPANY AND SOLE
PROPRIETORSHIP BUSINESS IN NIGERIA.
Syrbu, A. N. and Kvintyuk, Y. M., 2019. Cognitive Modeling of the Mechanism of Partnership
of Business Entities with Public Authorities. The 21st Century from the Positions of
Modern Science: Intellectual, Digital and Innovative Aspects, 91, p.104.
Aspan, H., 2017. Good Corporate Governance Principles in the Management of Limited Liability
Company. International Journal of Law Reconstruction. 1(1). p.87.
Boller, L. and Morton, F. S., 2020. Testing the theory of common stock ownership (No. w27515).
National Bureau of Economic Research.
Park, C., Choi, P. M. S. and Choi, J.H., 2019. Is individual trading priced in the preferred stock
discount?. Emerging Markets Review, 38, pp.326-346.