Types of Business Enterprise: BA Business L5, Accounting for Business

This essay provides a detailed analysis of different types of business enterprises, focusing on sole proprietorships, partnerships, and companies. It explains the characteristics, advantages, and disadvantages of each type, using examples to illustrate their practical application. The essay also critically distinguishes between two forms of share capital (authorized and outstanding) and two forms of long-term debt (mortgages and bonds) in the context of long-term finance for listed public limited companies. The discussion encompasses the legal and financial implications of each business structure, offering a comprehensive overview for business and accounting students. The report concludes by summarizing the key differences and importance of understanding various business structures for effective financial management and strategic decision-making.

Types of business enterprise

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Describing three types of business..............................................................................................3
Presenting two forms of share and long term capital..................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................1

INTRODUCTION
Business can be defining as a commercial activity of manufacturing and selling goods
and services with the motive of earning capital. The present report is based on the types of
business such as sole trader that can be define as business run by the single owner whereas,
partnership can be describe as industry run by two or more than group people. On the hand,
companies is known as legal entity representing association of people. Lastly, the study will
throw light on two forms of share capital and long term debt.
MAIN BODY
Describing three types of business
Business activity can be defining as commercial entity that deals in selling and buying the
product and providing services in order to earn the capital. In simple words, it can be describing
as organization that engage in the activity related to the profession and industrial activity (Types
of business., 2021). There are three types of business that are explained in details below:
Sole Proprietorship: It is one of the most basic and common form of the business. It is
mainly run by one single owner that is liable for making the decision of the company and bear all
the liability of the firm. Moreover, the business expense of the organization is paid by the
personnel expense of the company. This type of companies is easy and less expensive process to
set up as and the owner can choose whether it wants to retain full control of the business.
furthermore, it is tax benefit as it only taxed once because the income of the company is
considered as the personnel income of the owner (Darmansyah, 2018). Along with this, there are
less legal requirements of establishing this business compare to other types. The classic example
of sole proprietorship is freelancing and retail grocery store and the companies like coco cola and
amazon are single owner company.
Partnership: It can be defining as the business run by two or more people in order to
accomplish the common goal. Moreover, the liability lies on both partners as well as profit and
loss are bear by both of them equally or as per the contract made by them. This type of business
is generally have more legal requirement compare to sole business such as business contract
because there are high chances of fraud. Furthermore, there are various type of partnership such
as general, limited and limited liability partnership (Cui and et.al., 2018). Example of
partnership are Spotify and Uber that are running their business jointly.

Company: It is a separate legal entity created by the shareholder and incorporating the
owner for personnel being liable for the company debts or legal disputes. Moreover, this type of
business required more legal requirements and has more complex process as compare to other
type of business. Along with this, for running the business shareholders are required to make
AOA (Article of association) that includes number of shares to be issued, the aim of the business
and location of the organization. Additionally, the corporation do not come to end even if the
owner of the organization is bankrupt because it is a separate legal entity. There are three types
of business such as C, S and non-profit corporation. Example of such business is Associated
British Foods Plc.
Presenting two forms of share and long term capital
Share capital can be defined as the process of raising the money by issuance the common
or preferred stock. In other words, it is the total amount of capital raised by the frim through
sales of shares. There are three types of share capital such as Authorized, issued, share capital on
balance sheet and outstanding shares.
AUTHORIZED SHARE OUTSTANDING SHARE
It is the maximum number of share that an
organization is legally allowed to issues to the
investor (Difference between Authorized and
outstanding share.,2021).
It is known as the shares that are sold to the
investor from the available number authorized
share.
The maximum number is establish in the legal
documents of the company such as Article of
incorporation.
The maximum no of share is organized by
the investment bank.
It can be increased by the owners of the
company in any board meeting.
Several activities can increase the no of
outstanding share.
Debt is usually the money owned by the one party on order to accomplish the business
objective. The one how give the money is known as creditor and the person that owns the money
is known as debtor. Debts helps the business in overcoming the financial threat that contributes
in enhancing the growth of the firm as well as maintain the stability in the competitive
environment (Cheng and et.al., 2020). Moreover, debts are majorly classified into two types
long and short term. The long terms debts refer to the obligation that has to pay within the 12

months. whereas, short term means financial loan that can be due for more than 1year.
Furthermore, the main types of long term debts are Bonds and mortgage that are distinguish in
details below:
Mortgage is a special type of secured loans and the main aim of this loan is specified to
the lender. The loan is mainly given on the fixed and non-movable asset. Likewise, land, house
farm. Moreover, it is mainly taken by the financial institution and the lender can seize the
property if the repayment is not satisfactory (Fout and et.al., 2020). Whereas, Bond is a fixed
income instrument that is represent the loan made by the investor. The debtor has to repay the
amount on the specified date that is mentioned in the bond certificate or on the maturity.
Additionally, it contains a legal terms and conditions under which bonds are issued or
available.
CONCLUSION
From the above report it has been concluded that business is a legal entity that deals in
commerce activities such as manufacturing and selling the products and as well as offer service
to the customer. In order to earn the revenue and achieving the organizational goals.
Furthermore, the study has also summarized about the types of the business such as sole,
partnership and company. Lastly, the report has thrown light on the types of long term debts and
share capital.

REFERENCES
Books and journals
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.
Cui, C. and et.al., 2018. Review of studies on the public–private partnerships (PPP) for
infrastructure projects. International Journal of Project Management, 36(5), pp.773-
794.
Darmansyah, A., 2018. Comparative analysis of bookkeeping at sole proprietorship and
partnership small and medium enterprises: Study on culinary sector in Greenville,
Jakarta. Scientific Research Journal (SCIRJ), 6(6), pp.1-10.
Fout, H. and et.al., 2020. Credit risk of low income mortgages. Regional Science and Urban
Economics, 80, p.103390.
Online
Difference between Authorized and outstanding share.,2021. [Online]. <
https://www.accountingtools.com/articles/the-difference-between-authorized-and-outstanding-
shares.html >.
Types of business., 2021. [Online]. Available through <
https://corporatefinanceinstitute.com/resources/knowledge/strategy/types-of-businesses/>
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