Travel Reference
In-Depth Information
Private limited company
Partnership
Any business that has 'limited' or 'ltd.' after its name
is a private limited company. 'Limited' means that
the company enjoys the benefi t of 'limited liability',
meaning that investors in the business are liable
for company debts only up to the amount that they
have actually invested. This is in stark contrast to sole
proprietors and partnerships, where individuals are
personally liable for all their debts. Limited companies
exist in their own right, distinct from the shareholders
who own them. This means that their fi nances are
separated clearly from the personal fi nances of their
owners. Limited companies must be registered at
Companies House and must have at least one director
and a company secretary. Profi ts are usually distributed
to shareholders as dividends. Many travel and tourism
companies operate as private limited companies,
with examples as diverse as travel agencies, tourist
attractions, country house hotels and tour operators.
In a partnership, two or more people share the risks,
costs and responsibilities of being in business. Each
partner is self-employed and takes a share of the
profi ts. Usually, each partner shares in the decision-
making and is personally responsible for any debts
that the business runs up. An important point about
partnerships is that the decision of any one partner
is binding on all the other partners - this can cause
problems if one partner proves to be unreliable or
untrustworthy. In travel and tourism, partnerships are
common in the hospitality sector, with many pubs,
cafés, restaurants, small hotels, guesthouses and inns
being run as partnerships. Advantages of partnerships
are that extra capital is available to invest in the
business and that the responsibilities are shared by the
partners.
Country
Advantages
Disadvantages
Sole trader
• Independence
• Easy to set up
• Profi ts retained by owner
• No limited liability
• Little support
• Personal responsibility for debts
Partnership
• Easy to set up
• Skills and experience of partners
• Shared responsibilities
• Extra capital available from partners
• Possible disagreements between
partners
• No limited liability
• Partners are personally liable for debts
• Decisions of one partner binding
on all
Private limited company
• Limited liability
• Access to extra funds for expansion
• Personal risk is reduced
• Must be registered with Companies
House
• Extra fees for registration and
incorporation
• Extra legal duties
Public limited company (plc)
• Limited liability
• Shares can be traded on the Stock
Exchange
• Status as an established company
• Easier to enter into mergers and
acquisitions
• Sometimes slow to react to
opportunities
• Less confi dentiality as affairs are in the
public domain
• Extra costs associated with large
organisations
• Risk of takeover by another company
Fig 2.1 - Advantages and disadvantages of main business structures
