Forms of Business Organisation (I): Sole Traders and Partnerships

Abstract

There are three major forms of business organisation operating within the private sector, namely, sole trader, partnership, and limited companies.¹ Of the three, limited companies are by far the most important in terms of share of total output and employment. There are, however, many more unincorporated than incorporated businesses operating in the United Kingdom. Sole traders and partnerships are normally much smaller in scale of operations than incorporated businesses, although many of the latter also qualify under almost any definition of small business. Specific financial problems of small businesses have been studied by a number of government committees, including in recent years the Bolton Committee² and the Wilson Committee.³ The subject of this current chapter are those accounting issues which relate specifically to unincorporated businesses. Accounting for Value Added Tax is also considered in this chapter although the procedures explained apply equally to incorporated businesses.