c3_cs_yr8_brunei_low - Chapter 3 Types of Business...

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Chapter 3 Types of Business Organisation 15 Chapter 3 Types of Business Organisation In this chapter, you will learn to: 1. name the three types of business organisation; 2. list the features of each type of business organisation; 3. explain the meaning of limited liabilities; 4. state the advantages and disadvantages of each type of business organisation; 5. explain the differences between a private limited company and a public limited company. Learning Objectives Introduction Goods and services are usually provided by either the private or the public sector. The main types of business organisation in the private sector are sole proprietorship, partnership and limited company. Each type has its own special features. Types of Business Organisation Sole Prorietorship Limited Company Partnership Fig 3.1 Main types of business organisation Sole Proprietorship A sole proprietor or a sole trader refers to a person doing business on his or her own. In other words, there is only one owner. This is the simplest and most common form of business organisation. Examples of sole proprietorship are sundry shop, restaurant, car workshop, beauty salon and food stall. The term ʻsole proprietorshipʼ means the owner has no business partners. However, it does not mean that he is managing his business alone without helpers. The sole proprietor may employ workers or assistants to help him run his business, but he is fully responsible for the success or failure of his business. In Brunei, a sole proprietor registers his business under the Business Names Act 1958, and does not have to pay company tax.
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Commerce 16 Features of a Sole Proprietorship The features of a sole proprietorship are as follows: 1. The business is owned and controlled by one person. 2. The main source of capital is the ownerʼs savings. 3. Liabilities are unlimited. 4. All profits go to the owner. 5. The owner bears all the risks and losses. Advantages of a Sole Proprietorship The sole trader does not have to worry about many legal requirements when he starts or even dissolves his business. Being the sole owner, he does not need to consult or ask others before making a decision. The business owner also has complete control over his business and is free to make his own decisions. Since the owner keeps all the profits from his business, he is motivated to work harder. Disadvantages of a Sole Proprietorship A sole proprietor may face difficulties in raising new capital as banks and other lending institutions may hesitate to lend him a long-term loan. Therefore, this may hinder the growth of his business. As this form of business organisation has unlimited liability , the owner is personally liable for any debts that his business owes. If the owner decides to stop his business or dies, the business ceases to operate. Hence, the life span of a sole proprietorship is rather uncertain. To ensure the success of his business, the sole trader has to work long hours and put in a lot of hard work.
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