h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Okay. But as I say, it might take a while. I'm very busy at the moment with GCSE exams coming up.

Good luck with the exams! When you're ready, give us a shout about this 'ere entry.

Ok. Thanks.

If you've done GCSEs I presume you're getting your results next week - Good Luck!

Hi there,

I agree that the title needs to be changed. Otherwise Bels' comment is right. This entry seems to be about the different types of business that are out there, not how to run a business.

As well as the tax issues that Bels pointed out, there are all sorts of other issues - health & safety regulations, working time regulations, minimum wage, relevant acts of parliament (such as the data protection act) that those starting a business will need to consider. It's not just about the accounting.

That said, this would make a good entry on types of businesses, taking on board the suggestions you've been given so far.

I've got a couple of my own to add:

Sole Traders

What's the difference between being a Sole Trader and being Self Employed? Is there any?

Partnerships

>>>If the enterprise fails they are responsible for all debts.

The enterprise doesn't have to fail for partners to be liable. They can be liable if, for example, someone successfully sues one partner.

>>Advantages

I would have thought fixed-cost savings would be a big advantage of going into partnership with someone. Some partnerships don't share workload, the partners have their own separate 'offices' but they share costs such as rental, heat and light, office stationary etc.

Limited Companies

>>This means that if the business fails, they only have to pay back the capital that they invested in the company.

Not exactly. It means that they are liable only for the amount they invested in the business in the first place (ie not their personal assets). So if a company goes into liquidation (one circumstance of 'failing') the liquidator liquidates only the business assets in order to pay off as many creditors as possible, not the owners' houses, cars, furniture etc.

>>Examples of Limited Companies

It's a nit-picking point but Sony and Microsoft are corporations. These are more or less the same as Limited Companies but there are one or two technical differences. And this is an American term, not a British one. I'm not fully conversant in the subtle differences between LLCs and corporations, but why not choose a couple of British Ltds to be on the safe side?

Good luck!

Gubernatrix

Thanks for the advice. I'll try to get onto it.

Sam & Cyzaki: You know, it may not seem it in the hyper-friendly utopia of h2g2, but in RL, considering that I've never met you or spoken to you before, that really is extraordinarily kind.

It is done. I've made changes, and taken on many of the points everyone has made. If there isn't anything else, then I suppose it's ready.

If anyone thinks that their contribution was large enough for them to be credited, then I'll put your names up.

BTW, I got my results, and I did better than I expected.

Congratulations with the results

Hi Mr or Mrs Anonymous,

Sorry, I don't think this is ready for the Guide yet.

It has the potential to be a very good entry. I like the way it is set out and the format of Explanation, Advantages, Disadvantages is very clear and readable. But the information you are giving still needs to be reviewed.

People who actually run their own businesses have given you advice in this thread, some of which you haven't taken into account. I find this odd.

You also have a tendancy to make subjective comments about money, but there are so many other things to take into account. A solution that may be expensive for one person may be cheap for another person depending on their circumstances and what type of business they want to run.

As a general comment, I feel that this entry places a lot of emphasis on "costs" and "paperwork", as if these are undesirable extras. They are not; they are part and parcel of running any kind of business. For anyone starting a business it is important to understand that there are certain costs associated with running any successful business, and if your aim is to spend as little as possible then it is unlikely that your business will be successful.

Sole Trading

>>>> This type of business carries with it a lot of paperwork, for example – accounts, ordering and assorted correspondence.

Not quite sure why you've left this in. As someone pointed out, all businesses require a certain amount of paperwork, and I wouldn't say that sole trading was the most cumbersome in this area.

>>This type of business is easy to set up.

Yes, but why? You haven't said. Presumably one reason is that you don't have to incorporate it with Companies House. However, you do have to make sure that the Inland Revenue knows that you are self-employed.

>>It is very flexible. The owner has the freedom to run the company how he or she likes.

I think the second sentence is true but not the first. Being able to run a company the way you want is not 'flexible'. In fact, you may well be constrained by the fact that there is only one of you.

>>The proprietor can offer a personal service.

That's not a particular advantage of a sole trader. The proprietor of a limited company can also offer a personal service. The only difference is that a sole trader can't usually offer anything *other* than a personal service.

>>>The business can be changed to suit local needs.

Again, this isn't just relevant to sole traders

>>>The owner must keep proper accounts

Why is this a disadvantage? I think someone already made this comment. Keeping proper accounts is very useful.

>>>There is a lot of paperwork to be done by the partners, for example – Deed of Partnership, certificates, and extra correspondence.

What is "extra correspondence"? The phrase doesn't mean anything in this context and isn't necessarily relevant to a partnership. Again, this has been mentioned in the thread already.

>>Nowadays, many partnerships are also private limited companies.

I think you are referring to limited liability partnerships, known as LLPs. Whilst they may in practical terms be almost identical to private limited companies (I'm not sure), LLP is the recognised term for these entities.

Limited Companies

>>>It has a legal position, as a company in it’s own right, not just a group of partners. (Although, if the business gets in trouble this could become a disadvantage.)

Why is this an advantage? You haven't said. Presumably the advantage is that any proceedings against the business are against the company as a legal entity not against an individual person.

I also don't understand the comment in brackets, since it seems to be saying the opposite of what limited liability is supposed to be about. I think you may be thinking of Bels' comment about the need to wind up a company separately, but this isn't to do with the business getting into trouble. Certainly, a business getting into trouble is one instance where having to wind up a company may be a disadvantage. But it may also be a disadvantage if you are setting up a company for yourself (if you are a contractor, for example), as you need to anticipate the costs of winding down as well as setting up, and it may turn out not to be worth it.

>>This type of company is very expensive to set up.

It isn't, and a couple of people commented on this in the thread. If I wanted to incorporate Gubernatrix Ltd at Companies House it would cost me £20. If I wanted to get someone else to fill in the forms (which are quite complex), there are companies out there that charge less than £100 to do the whole package. In fact, I know somebody who has paid £55. That's pretty darn cheap.

If you are trying to make the point that setting up a limited company is generally more costly than setting up as a sole trader, why don't you say that? But you must justify these comments as well, otherwise you are in danger of being misleading.

>>Legal and accounting fees can be especially costly.

But this isn't usually part of the set-up, it's part of the ongoing costs of the business. And there is no reason why legal and accounting fees should be "costly", unless you choose your lawyer or your accountant badly. If you can pay an accountant £100 to do something that would take you three days, you may well be saving money for your business. Moreover, if you undertake something yourself and don't do it correctly, you can cause more trouble and expense than if you paid a professional to do it in the first place.

>>>A PLC must also have a full audit every year; this obviously adds to costs.

As above. You say this "adds to costs" as if it was an optional extra, but it isn't, it's a requirement of the business.

Co-operatives

I found this section very confusing, I'm afraid - mainly because I don't know much about co-operatives and you seem to be assuming a certain amount of knowledge here.

>>This type of business offers competitive prices.

To whom? It's members? The public?

>>>The dividend on purchases and the interest on shares make their goods even cheaper.

Cheaper to whom? And what purchases? I thought the dividend was essentially the part of the profits that goes to members. And how does the interest on shares make goods cheaper? I thought this benefitted individual members (ie the holders of the shares).

>>>A range of services (for example The Co-Op Bank) are offered to members.

This is a bit confusing. Basically there are consumer co-ops (such as food retailers, travel agencies) which supply goods and services to the public and are seen on the high street. The there are other types of co-ops, such as credit unions and housing co-ops, which supply goods and services to their members. I can buy my groceries from the co-op but that doesn't make me a member.

>>>Co-operatives can only offer a restricted range of goods. Famous brands are not (usually) stocked.

I don't understand what the restrictions are. Are you just talking about groceries? Why can't the co-op grocery store stock famous brands?

Franchises

>>A franchise costs the franchisee a huge amount of money.

I would be wary of statements like this as they are too subjective. Yes, a franchise tends to cost more than, say, a CD player, but what makes it a "huge amount of money"? If I wanted to run a fast food outlet it might be much cheaper for me to get a franchise than start the business from scratch.

>>>The franchisee has to pay the franchisor royalties.

Why is this a disadvantage of owning a franchise? It could be much cheaper to pay royalties for a nationally-marketed brand than to do all your own advertising. And even if it wasn't cheaper, it might be done more expertly than you yourself could do.

Perhaps the disadvantage is that you don't have control over the type of marketing, so you would still have to pay to use the material even if you didn't think it was working for you.

To sum up, I've made a lot of comments but I don't think there is a great deal you need to add to your entry. I just think you need to be more rigorous in what you say and how you say it.

Gubernatrix

I agree with Gubernatrix. You need to put in some good solid work on this to get it into shape for the Edited Guide. You've had a lot of help from this thread: don't let it go for nothing.

By the way, there are lots of sources of help on setting up a business. The VAT office, the Tax office, the local Chamber of Commerce or BusinessLink, the CAB, stuff in your local library or Town Hall. So there's plenty of information available. At the very least you should get hold of the basics on VAT, which affects every business in the EU, even those that are exempt or zero-rated or unregistered.

Hello

How is work on this going?

Researcher PSG

One little thing: hsving grouped PLC and Ltds together, when you give your examples you should say which is which type of company.

2/3

One little thing: hsving grouped PLC and Ltds together, when you give your examples you should say which is which type of company.

2/3

Okay - here's how it is. I don't know any of the answers to these questions. I don't know what you are all talking about. And frankly, I can't be bothered to find out. I think I'll put this in the flea market. Thanks for all your help.

Good to see a bit of honesty.
Oberon2001

Um... how do I go about putting it in the flea market, anyway?

If the researcher wanted this to go in the flea market, do you think we should oblige? Or should this go back to entry? The author hasn't quite elvised, but they aren't around any more and have made it clear they don't want it in PR any more...

That sounds reasonable to me. I'll add this to the list of moves and send a single e-mail later in the week

Hmmm? What? I'm still here. What do you mean?