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Three Different Types of Business For Your New Company

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11 January 2018. When you decide to start a company,  there are several different business types that you can create. Each one has its own benefits and drawbacks. Here are three types of business that you could set your new company up as.

Sole trader

A sole trader is probably the most simple and basic type of company that you can create. A sole trader is usually a reserved for a company that is run by a single individual. You have total control over the entire business, but that also means that you have full responsibility for every area of it. This might mean that you want to pay for certain things to be done or contract them out. This could include work like accounting or website work. You wouldn’t need employees, but you still need things complete. One of the major downsides to being a sole trader is that you have unlimited liability. What this means is that if you suddenly have debtors, then everything you own can be used to pay them back. This might result in you losing things like your house or other assets. However, if you are clever, you can avoid this pitfall. Sole traders are the easiest type of company to set up, and they are perfect if you work alone.

Franchise

A franchise is where you take on running a part of an established company. Think of something like McDonald’s and you will start to get a picture of what a franchise is. You would run the business, share in the profits and be responsible for everything. The benefit is that you gain the renown, brand and backing of an established organization. You will need to pay a certain amount of your profits to them each year, but that is often a small price to pay for having a franchise. The best franchise to own is probably one that you have the most knowledge about, and there are a lot of companies who are willing to franchise themselves. If this kind of business interests you, then you should do some research on the type of business that you want to run. While there isn’t as much flexibility as other types of business, it can be one of the most stable and profitable.

Limited company

A limited company is essentially the opposite of a public company. Whereas a public company has its share open the public, a limited company doesn’t. A limited company is a type of incorporated company, and this means that you have limited liability. This means that if the company goes under, then your personal assets are not at risk. You might want to set up a limited company if your company is going to be taking in a large amount of revenue, you are employing a lot of people, or you are starting it with multiple partners. A limited company runs much like a normal company and is quite unlike being self-employed. A limited company is a useful type of business to set up if you are planning to do big things, but don’t want to have publicly owned shares.

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