ENTREPRENEURIAL SPIRIT
Leonardo da Vinci project EL/2000/B/P/114153

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Sole trader - Operating as a sole trader is the simplest form of business. An individual can start a business in this way with the minimum of fuss.

Partnership - A business can be established as a partnership of a group of individuals doing business together.

Company - A business can be established as a company, which has a legal existence separate to its owners.

The distinction between Partnership and Company lies in the extent of liability of the members for a firm's obligations. In the partnership, members have unlimited liability towards the firm's creditors, whereas in companies it is the company that is liable with its assets; the liability of members is limited to the share of the capital they have subscribed. In other words, the company's assets are independent of those of its members. Only companies have legal personality, i.e., they are treated by the legal system as true legal persons, or subjects, formally distinct from the natural persons who are the members.

Cooperative - is a fourth and minority legal form, which nevertheless has a part to play in the small business world in some countries. The cooperative is owned and controlled by its members for their benefit e.g. a group of workers or people living in a local community.

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SOLE TRADERSHIP:
As a sole trader there is no legal distinction between you and your business - your business is one of your assets, just as your house or car is. It follows from this that if your business should fail your creditors have a right not only to the assets of the business, but also to your personal assets, subject only to the provisions of the Bankruptcy Acts (these allow you to keep only a few absolutely basic essentials for yourself and family).

PROs 
· Easy to set up - you can start the business in a small way, from your home if you want. 
· You are the boss. You can run the business at your own pace and in your own way. 
· You keep the profits. · You can offset some business expenses against earnings for tax purposes. 
· No public disclosure of your affairs. 
· Profit or loss in one trade can be set off against profit and loss in any other business you run

CONs 
· You are totally responsible for any debts your business incurs. If you go bankrupt, your creditors are entitled to seize and sell your possessions - personal as well as business. 
· It can be lonely. 
· You have a low status.

PARTNERSHIP:
The principal characteristics of partnerships are as follows: they do not have legal personality, partners have unlimited liability for the obligations incurred by the firm and, consequently, partners as such are invested with the power to act as the company's directors and representatives or agents, irrespective of the amount of capital they have contributed or the size of their personal wealth.

There are two main types of partnership: · General partnership, in which all partners are jointly liable with their entire estate for the activity and the debts of the company · Limited partnership, which has both general partners with unlimited liability and 'sleeping' partners with no liability but the capital.

PROs 
· No formalities involved in setting up (although it's sensible to have a Partnership Deed drawn up between you). 
· Less lonely than starting up totally on your own . 
· Secrecy - no obligation to submit copies of your accounts for public scrutiny. 
· A chance to start off with increased capital. 
· No limitations on capital, assets or scope of business as with a limited company.

CONs 
· Each partner is liable for the debts of the company - regardless of which partner is at fault. 
· Risk of personality clashes between partners. 
· The death or bankruptcy of any partner automatically dissolves a partnership unless there is an agreement otherwise. Once again, the partnership is a usually recognized business form, with some variations applying in different countries.

COMPANY:
The Company has the following characteristics: it is a legal person; its shareholders' liability for its debts is limited to the amounts paid and remaining to be paid on their shares; the shareholders' interests in the company capital are represented by transferable shares, i.e., the company's share capital is divided into equal fractions (shares) or into capital parts or holdings.

There are two main types of company: 
· Public limited company (Societe Anonyme) 
· Limited liability company

PROs 
· Members' (the directors and shareholders) financial liability is limited to the amount of money they have paid for shares. 
· The management structure is clearly defined, which makes it easy to appoint, retire or remove directors. 
· If extra capital is needed it can be raised by selling more shares privately. 
· It is simple to admit more members. 
· The death, bankruptcy or withdrawal of capital by one member does not affect the company's ability to trade. 
· The disposal of the whole or part of the business is easily arranged. 
· High status.

CONs 
· Requirement to register the company with the Registrar of Companies and provide annual returns and accounts - which must be audited. All details of the company are available for public inspection so there can be no secrecy. 
· Can be more expensive to set up. 
· May need professional help to form. 
· The advantages of limited liability status are increasingly being undermined by banks, finance houses, landlords and suppliers who require personal guarantees from the directors before they will do business.

COOPERATIVE:
Cooperatives are mutual societies formed with the purpose of providing their members with a benefit consisting of goods or assets, services or opportunities to work on more favourable terms than those offered in the open market. This distinguishes them from the other types of company mentioned so far, whose purpose is to make a profit, sharing that profit between their members. However, cooperatives may also make distributions of profits to their members provided that such distributions remains secondary to the primary mutual purpose. Consequently, cooperatives may not distribute the entirety of their profits to members. The law governing cooperatives is essentially modelled on the basis of the legislation governing the companies. The most common types of cooperative are the following: manufacturing and working co-operatives, in which members are both entrepreneurs and wo r ke r s ; consumer cooperatives, whose purpose is to provide their members with goods on more favourable terms than those available on the open market; agricultural cooperatives, to which farmers transfer their products for storage, processing and sale; and banking cooperatives, which include mutual banks and cooperative banks.

PROs
· Each member of the cooperative has equal control through the principle of 'one person one vote'. 
· Profits can be retained in the business or distributed in proportion to members' involvement, e.g. hours worked. 
· Members must benefit primarily from their participation in the business.

CONs 
· Interest on loan or share capital is limited in some specific way, even if the profits are high enough to allow a greater payment. 
· It is certainly not a legal structure designed to give entrepreneurs control of their own destiny and maximum profits.

This chapter has looked at the common business types in Europe, higlighting the differences among them, and the pros and cons of each type of business.

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