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Comparison of Different Business Models

The document compares different business models including sole traders, partnerships, limited liability partnerships, and private limited companies. Sole traders and partnerships are easier to start but provide unlimited personal liability. Limited liability partnerships and private limited companies provide limited liability but have higher set-up costs and ongoing reporting requirements. Each model has advantages and disadvantages depending on factors like liability, control, flexibility, and financial disclosure obligations.

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Beth King
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68 views2 pages

Comparison of Different Business Models

The document compares different business models including sole traders, partnerships, limited liability partnerships, and private limited companies. Sole traders and partnerships are easier to start but provide unlimited personal liability. Limited liability partnerships and private limited companies provide limited liability but have higher set-up costs and ongoing reporting requirements. Each model has advantages and disadvantages depending on factors like liability, control, flexibility, and financial disclosure obligations.

Uploaded by

Beth King
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Comparison of different business models

Model Structure Advantages Disadvantages


Sole trader  The sole trader is the  Can start trading immediately  Unlimited personal liability
exclusive owner of the  There are no setup  Contracts are formed
business. costs/formalities between the sole trader and
 It is not a separate legal  Can keep all the profits third parties
entity.  Full control over decision
making
 Complete privacy as no
disclosure requirements
Partnership  2 or more persons own the  Can start trading immediately  Partners have unlimited
business and share the  There are no setup personal liability
profits. costs/formalities  Contracts are formed
 The partnership is not a  Full control over decision between the partners and
separate legal entity making third parties
 Complete privacy as no  A partnership agreement will
disclosure requirements be required otherwise the
Partnership Act 1890 will
apply in default
Limited liability partnership  2 or more persons carrying  All partners have limited  There are set-up costs and
on a business. liability formalities as an LLP must be
 The partnership is a separate  The partnership can enter registered at Companies
legal entity contracts with third parties House
 Flexible management  Must file annual accounts
procedures and has disclosure
obligations
 A members’ agreement will
be required otherwise the
provisions of the Limited
Liability Partnership
Regulations 2001 will apply in
default.
Private limited company  A company is a separate legal  Limited liability as  There are set-up costs and
entity distinct from its shareholders are only liable formalities as a company
owners to pay any amount unpaid on must be registered at
their shares. Companies House
 Minimum of 1 person  Extensive disclosure
required to incorporate a obligations
company  The Companies Act 2006
 Easier to raise finance imposes strict requirements
on how companies are run.

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