Ownership and Control Essay

The first business decision that an entrepreneur faces when he is opening his private business is the type of enterprise he/they will create. Basically there are three main forms of business enterprises that can be opened, a sole trader, a partnership and a limited liability company. Such enterprises comprise different legal status and ownership, plus different control measures. In the following paragraphs we will explain such issues of these forms of organizations. A sole trader is the simplest form of business enterprise. It usually consists of one individual who opened a business operation. Sole traders are usually small firms due to the limited amount of capital that is invested by a single owner. The main benefit of a sole trader is that the owner has full control over the assets of the business and all the critical decisions are usually taken solely by him. The main limitation of such a form of business, apart from limited capital is the unlimited liability on the organization’s debts. Partnership arises whenever two or more people invest money in a business to commence trading. A partnership also possesses unlimited liability like a sole trader. However more capital is available since money is invested by more people. In a partnership not all the partners exercise control on the firm especially if it is a limited partnership. In case of companies, which are limited liability due to separate legal entity, give room to shareholders and directors being formed. The shareholders are the owners, which can be a significant number, while the directors are the individuals managing the company which are not necessarily the shareholders particularly in public companies. Companies are frequently formed due to higher availability of finance.