Reading forms of business activities

TYPES OF OWNERSHIP

UNIT 7.

DISCUSSION What kind of organization do you want to work for? Why?

• the state

• a private limited company

• a nationalized company

• a partnership

• a public limited company

• other

Sole Proprietorship (UK), Individual Proprietorship (US)

Sole proprietors are individuals carrying out economic operations in various spheres of business activities (industrial, trade, transport, banking etc.) and concluding commercial deals on their own behalf. The legal form is not to be indicated in the name of the firm. The hired staff are not referred to as proprietors.

The proprietors must be registered in the trade register, obtain a licence to carry out business activities and keep the books reflecting the results of the latter. The contents of the books are a commercial secret not accessible to a third party. In case of a lawsuit the books can be open for the court and the parties concerned provided the proprietor acts either as a plaintiff or a defendant. Also, the books can be made public in case of either insol­vency or inheritance.

Sole proprietors are not subject to public report therefore it is not possible to get true information of their activities.

The sole proprietor is not a legal person and is fully liable with his pro­perty by the obligations of his firm. Millions of sole proprietors in the world carry out business activities mainly in the sphere of various services and retail trade.

PART II. FINANCE

Unlimited Partnership (UK), General Partnership (US)

The main feature of unlimited partnership is equal and collective responsibility for the property for all members of the partnership. In other words, creditors can be paid either at the expense of the partnership's property or private property of the members. Besides, the agreement can not provide for the exception of property liability of any of the members before a third party. The property of the unlimited partnership is a joint property of its members.

The profit obtained is distributed proportionately to the share of participation in the property of the partnership. Concession of the share of participation can be made only with the consent of the members. The number of the members of the partnership is not limited.

The unlimited partnership can be disbanded either in case of insolvency or resignation of one of its members or by resolution of all participants. Unlimited partnerships are not subject to public report.

Limited Partnership (UK, US) The limited partnership is a contractual union of entrepreneurs partici­pating only by way of contributions without taking direct part in the management (investors); and those who, apart from contributing, carry out direct management of the partnership and are fully liable by the partner­ship's obligations with their own property (full members).

It takes at least one full member and one investor to form a limited partnership. The limited partnership is to be registered just like any unlimited partnership.

The name of the partnership includes the names of one or two full members; the including of the name of the investor into the firm's name makes the investor equally and jointly liable by the partnership's obliga­tions.

Master Limited Partnership Master limited partnerships carry out business activities on the basis of a Charter and are to be registered. One or more full members and share­holders as investors make a partnership. Shares can either be sold to or distributed among the investors or quoted on the stock exchange. Full members run the partnership and are liable by the partnership's obliga­tions. The shareholders run the risk of devaluation of their shares. A legal person can act as a full member. Thus a master limited partnership bears characteristics both of a limited partnership and a public limited company. The advantage of a master limited partnership is in getting additional income through an issue of securities and their subsequent sale on the securities market. Dividends are tax exempt, so the investors are mainly attracted by a tax regime of master limited partnerships which pay only income tax.

Private Limited Company (UK), Close Corporation (US) A private limited company has the word "Limited" or the abbreviation 'Ltd' in its name. A private limited company should be registered under the Companies Act and act in compliance with its Charter. The company is a legal person fully liable by the company's obligations. The equity capital of the company is formed at the expense of deposits; the shareholders get a certificate of deposit which is not considered to be a security and as a

UNIT 7. TYPES OF OWNERSHIP

rule can not be assigned to third persons without the consent of other shareholders of the company, that provides for the close character of the company. There are private limited companies with a single shareholder.

There is one more circumstance that limits the financial rights and hence production opportunities of the private limited companies, they are not allowed to issue debentures and announce public subscription for their shares.

Private limited companies keep statutory books which are not subject to public report. The number of members of the company is not large, usually consisting of close relatives or people knowing each other well, who united for business.

Public Limited Company (UK), Corporation (US)

Public limited company is the main legal form of large firms. A public limited company is a union of investors called shareholders. It carries out business activities on the basis of the Articles of Association and is to be registered under the Companies Act. Any legal person or an individual can be a founder of the company. The shareholders are not liable by the company's obligations. The public limited company is the most stable form of unification of capitals as the resignation of any of its investors does not involve the liquidation of the company. The investor has a right to sell his shares without consent of other shareholders.

The initial share capital is formed by way of selling shares. During that period the initial share capital is the only source of financing of its activi­ties. The funds obtained from the sale of shares are used for the purchase of plots of land, industrial premises and offices, equipment, basic commo­dities (raw materials) to launch manufacturing activities. Therefore the company receives an income and also can be financed by way of issuing debentures and securing bank loans.

Thus a number of advantages make a public limited company the most effective means of concentration and centralisation of capital goods and capital. The shareholders can return their capital only by way of selling shares at the price currently quoted on the stock exchange.

The shareholders have property and personal rights. Property rights are realised in case of liquidation of a company and in case of getting divi­dends. Personal rights mean the right to vote; normally a share gives a right for one vote. The decisions are to be taken by a large majority, hence the person or a legal person holding the majority interest is the one who makes resolutions. Public limited companies' names must have the abbre­viation "pic"' in their name.

VOCABULARY Sole Proprietorship (UK). Individual Pro- Private Limited Company (UK), Close

NOTES prietorship (US) - індивідуальне Corporation (US) - акціонерна компанія

підприємництво з обмеженою відповідальністю. Закрита

Unlimited Partnership (UK). General акціонерна компанія. Товариство з

Partnership (US) - повна спілка обмеженою відповідальністю закритого

Limited Partnership (UK, US) - типу

командитне товариство (товариство/ Public Limited Company (UK), Corpora-
спілка з обмеженою відповідальністю) tion (US) - відкрита акціонерна
Master Limited Partnership - акціонерно- компанія. Корпорація. Акціонерне
командитне товариство товариство відкритого типу.

PART II. FINANCE

to disband a company- розпустити компанію income tax- податок на прибуток insolvency- неплатоспроможність liability- відповідальність to liquidate a company- ліквідувати компанію majority interest- контрольний пакет акцій to obtain- одержувати to run the risk- наражатися на ризик share capital- акціонерний капітал statutory books- статутні книжки товариства з обмеженою відповідальністю, в яких відображається фінансовий стан, члени, керівництво та протоколи tax exempt- особа/організація, звільнені від сплати податків plaintiff-позивач

Articles of Association - статут акціонерної компанії Companies Act (UK) - Закон про структуру компанії (товариства з обмеженою відповідальністю) to assign one's rights - передавати свої права

to be fully liable for the debts - нести пов­ну відповідальність за заборгованість to bear characteristics - мати риси/ознаки capital goods - основні засоби виробництва

certificate of deposit - пайове свідоцтво concession of the share of participation -уступка частки участі consent - згода contractual - договірний debenture - боргове зобов'язання компанії

secured debentures (UK) - боргові зобов'язання, забезпечені активами

EXERCISES I. Answer the following questions:

1. On whose behalf do sole proprietors act?

2. In what cases can the sole proprietor's books be made public?

3. What is the main feature of unlimited partnership?

4. How is profit distributed between partners in unlimited partnership?

5. What is the difference between unlimited partnership and limited partnership?

6. What are the peculiarities of master limited partnership?

7. What are Private Limited Companies forbidden to do?

8. What is a public limited company?

II. Business. Choose the correct word to complete the sentence.

1. I'm afraid he's away_____ business today.

a) with b) on c) in d) to

2. I've applied______ the position of sales manager.

a) to b) as c) for d) about

3. Does our insurance______ cover accidental damage?

a) policy b) politics c) subsidy d) account

4. With_____ to your letter of 10th September I would like to place an order for your

new travel guide.

a) referring b reading c) reference d) reception

5. The new organisation consists______ five divisions.

a) in b) with c) on d) of

6. Does the design______ to the new regulations?

a) agree b) conform c) confirm d) consist

7. My bank has_____ in towns all over the country.

a) branches b) warehouses c) depots d) head offices

8. He was dismissed______ giving away trade secrets.

a) for b) with c) by d) to

9. Could I have a secretary to take some______?

a) writing b) dictating c) dictation d) commission

10. She put_____ an interesting proposal.

a) to b) against c) forward d) backwards

11. Could the manager______ with this enquiry?

a) trade b) see c) talk d) deal

UNIT 7. TYPES OF OWNERSHIP

12. Wfe have pleasure_____ enclosing our latest brochure.

a) to b) in c) for d) with

13. She_____ because she had been offered a better job.

a) resigned b) sacked c) fired d) dismissed

14. The agreement will______ trade between our countries.

a) increase b) inflate c) add up d) exaggerate

15. Please do not______ to contact our office in case of any difficulties. We are always

ready to help.

a) hesitate b) delay c) stop d) expect

III. Money. Choose the correct word to complete the sentence.

1. If business has been good, the staff get a_______ at the end of the year.

a) notice b) bonus c) fund d) deposit

2. He drew all his money______ the bank before he left.

a) of b) off c) out of d) to

3. Where can I get a good rate of_______ for my money?

a) credit b) interest c) debt d) bargain

4. We'll have to economize______ luxuries in the future.

a) for b) at c) of d) on

5. They went to get young people to open a bank_______.

a) count b) account c) counter d) deposit

6. Could you give me an______ of how much it will cost?

a) income b) estimate c) invoice d) expenditure

7. You have to pay a_____ now to reserve your holiday.

a) deposit b) security c) credit d) surplus

8. As the car is small, it's much more_______ on petrol.

a) expensive b) poor c) economical d) economic

9. All employees had to cut down on travelling_______.

a) expenses b) savings c) stoppages d) wages

10. My credit card is______ in most countries.

a) exchanged b) reserved c) excepted d) accepted

11. The bill came______ $100.

a) at b) for c) to d) as

12. They_____ part of his wages for being late.

a) reduced b) deduced c) deducted d) retired

13. Could you lend me $20? I'm a bit short_______ money.

a) of b) off c) with d) from

14. They persuaded him to______ money in their company.

a) investigate b) buy c) invest d) lay

15. You'll get a better______ of exchange at a bank.

a) rate b) value c) worth d) charge

16. The meals are such a reasonable price because they are_______ by the company.

a) allowed b) reduced c) deducted d) subsidised

IV Problem pairs. These pairs of words often cause problems. Choose the correct alternative for each.

1. EMPLOYERS/EMPLOYEES

a) are people who are employed by companies.

b) are people who give jobs to others.

2. WHITE-COLLAR/BLUE-COLLAR

a) ___ workers work in the factory.

b) ___ workers work in the office.

3. SALARY/WAGE

a) We pay a monthly___ by cheque to our white-collar staff.

b) We pay a weekly___ in cash to our part-time and blue-collar staff.

4. PERSONNEL/PERSONAL

a) Andrew has a____ problem: his wife wants to leave him.

PART II. FINANCE

b) Andrew's company has a_____ problem: their employees want a 20% pay increase.

5. LINE/STAFF

a) A___ manager works directly on the production of goods.

b) A___ manager gives service support to the managers in production.

6. INTERVIEWEE/INTERVIEWER

a) The person who asks most of the questions at an interview is the______.

b) The person who answers most of the questions at an interview is the______.

7. FOREIGNERS/STRANGERS

a) Our company has been bought by a German multinational. More and more______

are coming from abroad to work in our office.

b) There were two____ at the corner table in the restaurant where we usually go for

lunch: no one had ever seen them.

8. ADVERTISING/ADVERTISEMENT

a) Our___ budget is 10% less than last year.

b) Did you see the big____ for a new Managing Director for Acme in this morning's

newspaper?

V Types of companies. There are five main types of legally constituted company. Each type of company has different characteristics. Tick the correct characteristics for each business type, or write "possibly" if the characteristic could apply.

	Single individual owns company	Two or more owners/ directors	Quoted on Stock Exchange	Workers run the company	Unlimited liability	Limited liability	Owner is self-employed
Public Limited Company (PLC)
Private Limited Company
Sole Trader
Partner-ship
Cooperative

VI. Types of Business. Complete this table about the four main kinds of business in Britain.

TYPE OF BUSINESS	NUMBER OF OWNERS	NAME OF OWNER(S)	LIABILITY OF OWNER(S)	IF THE BUSINESS FAILS...	ADDITIONAL INFORMATION
Sole proprietorship D	A E	В Partners	unlimited	owners go C
F	2-50	G	Я	company goes	Name of company includes word Limited or abbreviation Ltd. Shares sold privately with agreement of other shareholders.
Must have Memorandum of Association and Articles of Association
J	2 or more
Name of company includes words Public Limited Company (Ltd.) or abbreviation pic Shares sold - K

UNIT 7. TYPES OF OWNERSHIP

16 — 4-789

VII. Investing in a Limited Company. Complete the text with the words from the box.

market	shares	dividends	debts	face	liability
liquidation	unlimited	freely	limited	creditors	bankrupt

When a limited company has started trading, you do not invest in (1)_________ by giving

more capital to the company. You buy them from one of the shareholders. If it is a private

limited company, shares can be bought and sold (2)______, usually at a Stock Exchange. If

the company is doing well and paying high (3)______, then you might pay less than the (4)

__ value of the shares. If it is doing badly, you might pay less than the face value of the

shares. The price you pay at the Stock Exchange (or to a shareholder) for your shares in
their (5)____ value.

If the company fails, it will stop trading and go into (6)________. This means that all the

company's property and equipment (its assets) must be sold and the money from the sale

will be used to pay its debts to its (7)_____. The shareholders may lose the money they paid

for the shares. If the company still does not have enough money to pay all its (8)_______, the

shareholders do not have to pay any more money. In other words, the shareholders' (9)
__ for debts is limited to the value of their shares.

On the other hand, if you are an owner of a business, which is not (10) ____________, for

example a sole proprietorship (owned by one person) or a partnership (owned by

between 2 and 20 people) and your business fails, you will go (11)________. In this case you

might have to sell your own private possessions (your house, car, furniture etc.) to pay all

your creditors. In other words, sole proprietors and partners have (12)__________ liability for

their firm's debts.

VIII. Must/can. Complete the following sentences with must or can.

1. There___ be at least two partners in a partnership.

2. A person who wants to start a business, but who has not got any partners_______ start a

sole proprietorship.

3. Two people starting a business together_____ start a partnership or a private limited

company.

4. You___ have as many as 20 people in a partnership.

5. A sole proprietor_____ pay the firm's debts with his/her own money if necessary.

6. Each partner____ pay the firm's debts with his/her own money if necessary.

7. Anyone___ buy shares in a public limited company.

8. The name of a private limited company____ include the word limited or the

abbreviation Ltd.

9. You___ only buy shares in private limited company if the other shareholders agree.

10 You___ draw up a Memorandum and Articles of Association when you start a

limited company.

IX. Key Words in Talking About Company Relationships. Match each of the words or phrases (1-12) on the left to an appropriate definition (a-l).

1. bid	a) A proportion of the total share capital of a company.
2. buyout	b) Buying a majority of the shares in a company, and so winning control over the company.
3. competitor	c) Joining together of the stock of two companies, so they become part of the same company.
4. divestiture	d) The total equity capital of a company, held by shareholders in the form of shares.
5. flotation	e) An offer to buy part of the share capital of a company.
6. joint venture	f) A company which owns more than 50% of the shares in another company.
7. merger	g) The relationship between two companies, both owned by the same parent company.
8. parent company	h) Selling equity capital in a company, and so ending ownership of the company.
9. stake	i) A situation where workers or management buy all the equity (or more than 50%), or buy other assets, and so gain control of a business.

PART II. FINANCE

tfer company j) A business which is trying to sell in the same market as another business.
I jck k) The open sale to private investors of shares in a company on the Stock Exchange.

1:;keover 1) A temporary arrangement where two companies work together for a particular project.

X. Securing a Loan. In order to get a loan from a bank companies are required to present detailed information about a company and its financial performance. Match the words and definitions.

High quality listed stocks with a triple A-rating.	a) working capital
I The amount of goods tied up in raw materials and finished goods.	b) premises
^: All persons who are employed and receive salaries from a company.	c) depreciation
- Items such as equipment or vehicles, which are owned by a business.	d) security
" A detailed investigation and report on the potential profitability of a project.	e) feasibility study
- Individuals who own part of a company.	f) fixed assets
~ A loss in value due to wear-and-tear or supply and demand.	g) turnover
i. The fixed costs of running a business, such as electricity.	h) operating costs
J The good name of a person or company.	i) expenditure
1). A total amount of revenue before tax.	j) payroll
1L Offices or property used by a company for the purpose of business activities.	k) shareholders
12. Any items, such as property, or investment which can be offered as a guarantee.	1) reputation
13. A person who provides a reference for another person, applying for a loan.	m) referee
И. A promise given by a third party to pay in case of default by the original borrower.	n) guarantee
15. Total cost of items purchased to run a company.	o) blue chip stocks

XI. Unlikely Possibilities. In pairs, discuss unlikely possibilities, like this: P: If you buy shares, you'll own part of the company. R: I'm not going to buy shares. P: But if you bought shares, you'd own part of the company.

1. If you start a business, you'll need capital.

2. If the bank gives you a loan, you'll pay interest on it.

3. You'll have unlimited liability if you start a partnership.

4. If you buy shares, you'll be a shareholder.

5. You'll be a partner if you invest in a partnership.

6. If the limited company fails, you'll only lose the value of your shares.

7. If you buy a controlling interest, it'll cost you several thousand pounds.

XII. Problem-solving. Work in small groups. Decide what sort of business you would start in these situations. There is no one correct answer in any case and you may be able to think of more than one possibility. Give reasons for the decisions you make. Practice the second conditional.

1. You and your spouse (husband or wife) want to start a grocery shop in a small village. There is already one grocery shop in the village owned by an old lady. Your bank will lend you the money you need.

2. Two couples have enough money to buy a small hotel which they will all work in. One of the couples has two young children.

3. You want to sell fruit and vegetables from a stall at the market. You need £500 capital which you can borrow from your father.

UNIT 7. TYPES OF OWNERSHIP

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