Types and Functions of the Private
Sector
Private Sector
There are two types of companies in the private sector: incorporated and
unincorporated.
Incorporated companies are considered by law to be separate from their
owners. This means that owners are not liable for any debts over and above
the amount they have paid for their share of the company or any loans they
have guaranteed.
Unincorporated companies
In unincorporated companies there is no legal distinction between the
company and its owners, which means that owners are liable for any
actions or debts of the company. For many businesses, despite the personal
risk of being liable for any debts, an unincorporated company is the best
option.
There are two types of unincorporated companies: sole traders and
partnerships.
Remember!!!
Unincorporates companies have the advantage of being simple to set up
and to administer and p0f having few regulations to adhere to. This is why
they are popular with self-employed people running a small business. The
main disadvantage is that the owners of the business have unlimited
liability if anything goes wrong.
Sole traders
Sole traders are self-employed and, as the owner of the business, have
complete financial responsibility and liability for any losses (unlimited
liability).
Advantages Disadvantages
The business can be set up easily – It can be lonely as a sole trader with
few rules and regulations need to be no one to help take up some of the
followed. burden of running the business.
Usually, you only need a small There is always the risk of unlimited
amount of capital to start the liability with your personal assets
business, unless expensive having to cover any business debts.
equipment is needed.
It is easy to manage the business as It can be difficult to develop and
everything is visible to the owner grow the business if you are the
and so decisions can be made only one in it.
quickly.
Sector
Private Sector
There are two types of companies in the private sector: incorporated and
unincorporated.
Incorporated companies are considered by law to be separate from their
owners. This means that owners are not liable for any debts over and above
the amount they have paid for their share of the company or any loans they
have guaranteed.
Unincorporated companies
In unincorporated companies there is no legal distinction between the
company and its owners, which means that owners are liable for any
actions or debts of the company. For many businesses, despite the personal
risk of being liable for any debts, an unincorporated company is the best
option.
There are two types of unincorporated companies: sole traders and
partnerships.
Remember!!!
Unincorporates companies have the advantage of being simple to set up
and to administer and p0f having few regulations to adhere to. This is why
they are popular with self-employed people running a small business. The
main disadvantage is that the owners of the business have unlimited
liability if anything goes wrong.
Sole traders
Sole traders are self-employed and, as the owner of the business, have
complete financial responsibility and liability for any losses (unlimited
liability).
Advantages Disadvantages
The business can be set up easily – It can be lonely as a sole trader with
few rules and regulations need to be no one to help take up some of the
followed. burden of running the business.
Usually, you only need a small There is always the risk of unlimited
amount of capital to start the liability with your personal assets
business, unless expensive having to cover any business debts.
equipment is needed.
It is easy to manage the business as It can be difficult to develop and
everything is visible to the owner grow the business if you are the
and so decisions can be made only one in it.
quickly.
