Types of Business Enterprise: Share Capital and Long Term Debts

This report provides an overview of different types of business enterprises, including sole proprietorships, partnerships, and companies, highlighting their characteristics and operational differences. It further distinguishes between share capital and long-term debts in the context of a public limited company, examining aspects such as the nature of returns, risk levels, and the status of holders. The report concludes by emphasizing the importance of understanding these distinctions for entrepreneurs and business planners, aiding in informed decision-making regarding business structure and financing.

Types of businesses
enterprise

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Explain three different type of existing business enterprise...................................................3
Distinguish between share capital and long term term debts with reference to a public limited
listed company........................................................................................................................4
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
The report prepared below explains various type of enterprises such as sole trader,
company and partnership firms that help the businesses to function. It is important for every
entrepreneur to examine type of business that would prove to be best for a enterprise. Sole
proprietorship can be explained as an incorporated organisation that only one individual owes.
Partnership whereas comprises of two or more people and in case of company there can be
unlimited people. It also takes in account different forms of share capital and long term debt in
relation with long term source of finance in public limited company (Ashmarina and Vrbka,
2019).
MAIN BODY
Explain three different type of existing business enterprise.
Several kinds of businesses are explained such as company, sole proprietorship and
partnership as under:
 Company: It can be described as a form of business that has a separate legal entity apart
from its owner and manager. Company can be built in various ways for paying tax and its
intention for paying its liabilities in terms of finance that depends on corporate law of its
powerfulness. For example Amcor Plc company has a different identity other than people
working in it and they have limited liabilities possessed with them as well (Lawrence,
Wong and Molteno, 2020).
 Sole proprietorship: It can be explained as a business that requires one individual for
operation and carrying out related functions as well. The liabilities are to be borne by the
sole trader and the benefits are also enjoyed by that person only. Proprietorship have no
identity apart from its sole owner. For example in case of A&W company that is a UK
based company enjoy sole dealership that facilitates them to take decision on their own
without any discussion and delay. The communication barriers never exist in such cases
thus it improves the efficiency and working of a firm in market & make proper use of
resources available with it.
 Partnership: It can be explained as a formal deal between two or more people/ parties that
help to manage & function a business and distribute its profits as well. There are several

types of partnership types in some liabilities and profits are shared equally whereas in
some cases they might have limited liability as well. For example: GoPro & Red Bull is a
famous partnership firm in UK that helps to build relationship between two or more
people that carry a common goal for generating profit & revenues (Gliszczyńska, 2018).
Distinguish between share capital and long term term debts with reference to a public limited
listed company.
Basis Equity Debt
Meaning This fund is raised by the company by using share
capital in the open market.
Funds are owed by the
company with other sources.
Earnings They are given a rate from the profits of the
organisation which is left after paying all the
liabilities.
They are paid a fix amount
interest which is fixed at the
time of issue of debt.
Collateral It does not need any collateral in return of these
securities as they are issued in lieu of share in the
profits.
There are certain securities that
are kept in order to pay these
securities at the end of the
period.
Nature of
return
The returns derived by the investor is variable or
irregular as it is only paid when the organisation
earns profits.
The returns are fixed or regular
a fix amount is paid by the
company to its creditors.
Risk It is risky, as it may provide greater returns than
debt but at the time of winding up it may end up
with nothing (Leminen and et.al., 2018).
It is less risky as it is secured
by securities and a fix amount
is paid in a specified time
period.
Status of
holders
They are the owners of the company as they get
share from the profits earned by the company.
They are the lenders of the
firm they provide long term
loan to the company in respect
of a paper which specifies the
date and amount which will be

received by the lender at the
end of a specific time period.
Return They receive dividend in respect of the investment
made by them at the end of the year.
They receive interest in respect
of the amount invested.
Type It includes stocks and shares. These includes term loan,
bonds, debentures, etc
Type of
funds
It is companies own fund as company is not liable
to pay any amount
These loan funds for which
company is liable to pay at the
end of a certain period.
Term These funds are mostly for a life time basis as they
are dissolved or paid at the time of dissolution only
if they are left with some amount of funds (Vahlne
and Johanson, 2020).
These funds are comparatively
less period of time as they
have a specific period of time.
CONCLUSION
The report prepared asserted above explains the benefit associated with different kinds of
businesses. It helps person who is planning to start a enterprise must know which would best suit
their idea and budget. It would further help in carrying out desired operations and results that are
being expected & planned by a entrepreneur. It helps to understand advantages and limitations
associated with such activities. The report helps to understand the difference between share
capital such as preference & equity share capital and long term debts for eg: term loans, bonds as
well.

REFERENCES
Books and Journals
Ashmarina, S.I. and Vrbka, J., 2019. Enterprise creditworthiness and preventing risks of debts.
Lawrence, A., Wong, J.L. and Molteno, S., 2020. Fostering social enterprise in woodlands:
Challenges for partnerships supporting social innovation. Forest Policy and
Economics. 118. p.102221.
Gliszczyńska, B.C., 2018. The Influence of Recruitment Process on the Enterprise
Development. Przedsiębiorczość i Zarządzanie. 19(4.1). pp.19-30.
Leminen and et.al., 2018. The future of the Internet of Things: toward heterarchical ecosystems
and service business models. Journal of Business & Industrial Marketing.
Vahlne, J.E. and Johanson, J., 2020. The Uppsala model: Networks and micro-
foundations. Journal of International Business Studies. 51(1). pp.4-10.