types of private ownership an overview : target audience - s.4 economics students uses of the...

Types of Private Ownership

Types of Private Ownership

An Overview :

Target audience - S.4 Economics Students

Uses of the program - lecturing assistance

Approximate length - ONE lesson

Supplements - textbook, notes

IntroductionThrere are THREE common forms of private enterprises. They are :

Sole Proprietorship

Partnership

Limited Company

Sole Proprietorship

Meaning

Features

Advantages

Disadvantages

Sole Proprietorship

Meaning

It is a firm with only ONE owner

Sole Proprietorship

Features

1. No separate legal status

2. Unlimited liability

3. Lack of continuity

4. Freedom of transfer of business

5. Simple to set up

Sole Proprietorship

Advantages

1. Strong incentive

2. Prompt decision making

3. Close relationship with employees

4. Close contact with customers

5. Simple to set up

6. Lower profit tax rate in H.K.

Sole Proprietorship

Disadvantages

1. Unlimited liabilities

2. Limited capital for expansion

3. Excessive responsibility

4. Lack of continuity

Partnership

Meaning

Features

Advantages

Disadvantages

Types

Partnership

Meaning

A relationship between personscarrying on a business for profit.

Partnership

Types

1. General Partnership

2. Limited Partnership

Their main differences are some partners in limited partnership are “limited partners”. They enjoy limitedliabilities.

Partnership

Features

1. Limit of 2 -20 partners

2. No separate legal identity

3. Unlimited liabilities

4. Act by one binds all others

5. Regulations on admission/withdrawal of partners

6. Lack of continuity

Partnership

Advantages

1. Wider sources of capital

2. Wider scope of specialization

3. Cost and risk sharing

4. Simple to set up

5. Lower profit tax rate in H.K.

Partnership

Disadvantages

1. One partners errs, all partners suffer

2. Possible delay in making decision

3. Inflexible organization

4. Lack of continuity

Limited Company

Types

Features

Advantages

Disadvantages

Limited Company

Types

1. Private limited company

2. Public limited company

Let’s see their difference !

Private Vs Public Limited Company

Private Public

No. of shareholder

Transfer of shares

Public trading of shares

Disclosure of accounts

2 -20 2 -

Not freely Freely

Not allowed Allowed

Not to public To public

Limited CompanyFeatures

1. Owners are shareholders

2. Independent legal identity

3. Limited liability

4. Lasting continuity

5. Possible separation of ownership & management

Limited CompanyAdvantages

1. Limited liability

2. Widest source of capital

3. Lasting continuity

4. Higher efficiency in management

5. Shares easily transferable

Limited CompanyDisadvantages

1. Longer time in making decision

2. More costly to maintain morale

3. Lower incentive

4. More complicated to set up

5. Higher profit tax rate in H.K.

THE END