Different Forms of Business Ownership |
1- Incorporated business:
These are separate legal entities which include private limited company, public limited company and limited liability partnership.
2- Unincorporated business:
These are usually treated as being the same as the owner e.g. sole trader or partnership.
3- Sole proprietorship:
A business owned by one person (a “sole trader”) (a person who runs their own business as a self-employed person. It can be one person who owns and runs the business but employs others. The business has no legal entity of its own and it is unincorporated. The sole trader is personally liable for all the debts of the business). There are no registration fees to pay, but a sole trader must register with HM Revenue & Customs for tax and National Insurance purposes.
A sole proprietor may operate on his or her own or may employ others. The owner of the business has personal liability for the debts incurred by the business.
4- Partnership:
a form of business in which two or more people operate for a common goal, which is often making profit. In most forms of partnership, each partner has personal liability for the debts incurred by the business. There are two typical classifications of partnerships:
A partnership is usually run on the majority decisions of the partners, although the partnership agreement can provide otherwise. This may prove to be cumbersome for large partnerships. Every partner of a partnership is jointly and severally liable for all the debts of the partnership. Therefore, they stand to lose not only everything they have invested in the business, but also any other property that they own. Their own private possessions may thus be ordered to be sold, in order to pay off their business debts.
5- Limited partnership
Unincorporated business established by the Limited Partnership Act 1907. It allows the partnership to have one partner whose liability is limited to the amount he initially invested in the business, provided:-
6- Corporation:
is either a limited or unlimited liability entity that has a separate legal personality from its shareholders, also known as members. A corporation can be organised for-profit or not-for-profit. A corporation is owned by multiple shareholders and is overseen by a board of directors, which hires the business‘ managerial staff. In addition to privately-owned corporate models, there are state-owned corporate models. The members of the company will not normally be liable for the company‟s debts. Members are required only to contribute the amount unpaid on their shares, if called upon to do so by the
company, or if the company goes into liquidation when it is insolvent, and must honour any personal guarantees given to banks, etc., when raising finance for the business. Any private wealth not invested in the business will normally be protected.
Private and public companies |
| Public company | Private company |
| is a company limited by shares, whose certificate of incorporation states that it is a public company. | The majority of companies are private, as public companies are more regulated |
| The issued share capital of the company must be a minimum of £50,000 and each share must be at least one quarter paid up.
It follows that at least £50,000 in nominal value of shares must have been purchased in the company and £12,500 paid up on them.
may not start trading or borrow money until it has received a certificate from the Registrar of Companies, stating that the nominal value of the company’s allotted share capital is not less than the authorised minimum |
the Financial Services and Markets Act 2000 prevents private companies from offering their shares or loan capital to the public; only public companies can offer shares or debentures to the public
commence business as soon as the Registrar of Companies has issued a certificate of incorporation, without minimum capital requirements; |
| the name of a public company must end with the words “public limited company” or “plc”, | it must end with the word “Limited” or “Ltd”; |
| Must have at least two directors. | needs to have one director |
| there is no minimum number of members | there is no minimum number of members |
| must have a company secretary | have or not have a company secretary |
| Is easier to administer than a public company; for example, it may dispense with the need to hold meetings and pass resolutions. |
A resolution |
Q: What is a resolution?
A resolution is an decision made by the members, a class of members, or the directors of a company to implement specific changes. It can involve actions like changing the company’s name, altering its share capital, or amending its articles.
The company’s members vote on the proposed course of action. If the predetermined majority required for passing the resolution is reached (e.g., 75% of votes), the resolution is considered passed. This voting procedure is typically used when a clear result cannot be obtained by a show of hands.
Q: What is voting on a poll?
Voting on a poll allows any two or more members to call for a poll. The company’s articles cannot exclude the right to demand a poll at a general meeting. A provision in the articles stating that a poll cannot be validly demanded by any five or more members with voting rights (except on certain resolutions) or by holders of less than 10% of the voting rights on the resolution will be void. If a member has multiple votes on a poll, they can allocate them differently.
Q: How can a member who cannot attend a meeting participate in voting?
A member who cannot be present at a meeting can appoint a proxy to vote on their behalf. In the case of joint holders of shares, the vote of the member listed first in the register of members will be counted, unless the company’s articles state otherwise.
Q: What are the requirements for circulating copies of a resolution?
The company is obligated to send notice of the intention to propose a resolution to its members and auditors. The Companies Act mandates that certain resolutions must be delivered to Companies House within 15 days of passing them. Failure to comply may result in fines for both the company and its directors.
Q: What are written resolutions?
Written resolutions can be proposed by either the directors or members representing at least 5% of eligible voters, or a lower percentage specified in the company’s articles. A written resolution of a private company has the same effect as if it were passed in a general meeting or a meeting of a specific class of members. Once a member signifies agreement to a written resolution, it cannot be revoked. Small companies no longer required to have auditors do not need to notify them about written resolutions.
Q: What are the types of resolutions?
There are two main types of resolutions:
Examples include; approving a director’s long-term service contract, ratifying a director’s breach of fiduciary duty (except in cases of dishonesty or unlawful/unauthorized acts), removing directors from office against their will, authorizing directors to allot shares, approving the company to buy back its own shares, etc.
Examples include; amending the company’s articles of association, changing the company’s name, disapplying pre-emption rights (obligation to offer shares to existing shareholders first), reducing the company’s share capital, etc.
Q: How is the type of resolution determined when the Companies Act does not specify?
If a provision of the Companies Act 2006 requires a resolution but does not specify the type, an ordinary resolution is required unless the company’s articles stipulate a higher majority or unanimity. However, when the Act explicitly requires an ordinary resolution, the articles cannot specify a higher majority.
Stay tuned for more notes ………
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