Memorandum Of Association

Types of Business Organisations

When we start to define a company it can be defined as generally a form of business organisation. In the legal field, a company is specifically Ð''a corporation, or less commonly, an association, partnership or union that carries on a commercial or industrial enterprise. Generally a company may be a corporation, partnership, association, joint Ð'- stock company, trust, fund or organised group of persons, whether incorporated or not and (in an official capacity) any receiver, trustee in bankruptcy or similar official or liquidating agent for any of the foregoing. More specifically we can state a company as either one of four distinct business organisations, Sole Trader, Partnership, Private company and Public company.

Sole Trader

A sole trader or a sole proprietor is a type of business entity which legally has no separate existence from its owner. All business debts are the debts of the owner. A sole trader essentially means a person does business in his or her own name and there is only one owner. An entrepreneur may opt for soul trader status due to the little additional work and the informal organisational structure to set u the business. In most cases for a soul trader there are no legal formalities to form or dissolve a business. A sole trader entrepreneur would be most suited for a small business such as a corner shop or a butchers but this would not be suitable for large scale investment as the entrepreneur does not have the advantage of raising capital through shares and bank finances. Hiring and firing employees can also become quite difficult. This form of business will have unlimited liability, therefore, if the business is sued, the sole trader is personally liable. The life span of a business is also uncertain. If the owner decides not to have the business or dies, the business ceases to exist.

Partnership

A partnership can be described as Ð''a relationship which subsists between persons parrying on business in common with a view to profit'. Under the Partnership Act 1890 a partnership is a nominate contract between each partner where they are entitled to equal participation in management, equal share of profits and have an equal responsibility for debts. Before an agreement is signed between partners it needs to be recorded in a written partnership agreement including date of commencement, duration of partnership, partners names capital and assets contributed, partnership property Ð'- proportion of profits partners entitled to, termination agreement Ð'- rights and liabilities on dissolution of partnership and terms on the introduction of new parties. Also a partnership can have no more than twenty members but there are exceptions under Art. 665 of 1986 order including solicitors, accountants and certain other professional bodies. Before a partner enters into an agreement they need to understand that they usually have unlimited liability but the Limited Liability Partnership Act 2000 allows partners to achieve limited liability for general trading debts which is often employed by large accounting and law firms. Under a partnership agreement it can be very flexible in the way that the original agreement can be altered if agreed and investment is also encouraged when needed. A main advantage of an agreement is in such times as the company is sued then all parties accept responsibility together. Some of the downfalls of creating a partnership can be when a company amasses debts then if one of the partners dies then his/her responsibility for this debt is cleared as is placed onto the other partners while also all partners have unlimited liability unless there is a limited liability agreement in place at the commencement of the partnership.

Private Company

The term privately held company refers to ownership of a company in two different ways. The first referring to a company owned by non governmental organisations and the second referring to the ownership of the company's stock by a relatively small number of holders who do not trade the stock publicly.

A survey was done in March 2005 which stated that 99.4% of British companies were private which are usually initiated by founding members through personal savings or bank loans. In the set up of a private company there will be pre-emption clauses where if a member decides that he/she wants to sell their shares then they must offer them to somebody already in the company before going public.

An advantage of being in a private company is that there is limited liability indicated by Ð''limited' or Ð''Ltd'. The member is liable for the amount not paid in shares but not for the company's debts.

Public Company

A public company usually refers to a company that is permitted to offer its securities (stock, bonds) for sale to the general public typically through a stock exchange. Usually, the securities of a public company are owned by many investors while the shares of a private company are owned by relatively few shareholders. Members of the public company also have limited liability as indicated by the words Ð''public limited company' (PLC or plc) at the end of the company name. Under the formation of a new business, members must be allocated a nominal value of shares (i.e. the least value shares can be sold for) to a value of at least Ð'Ј50000 which can be partly paid from a value of 25% as long as there is proof there is an ability to pay the outstanding amount.

Basic Company Structure

The basic company model assumes a separation of ownership and control. Shareholders are able to see how their money is being inserted and used and are given residual control once a year at the Annual General