Identify the Three Main Types of Business Organisations Recognised in Scots Law.

| A sole proprietorship is easy to create; there is minimal creation cost and time.The single owner has autonomy in decision making; sole owner makes all decisions related to the business and has complete ownership of business’s finances.

A sole proprietorship is a form of business that is owned by a single individual.  • Liability – Due to the lack of legal distinction between the owner and the business, the owner is fully responsible and liable for all debts that the business incurs in the same manner that an individual is fully responsible and liable for all debts that they incur. There is no legal distinction between the assets of the owner of the sole proprietorship and the business; this means that creditors have the ability to come after the owner’s business and personal material assets.   Income Taxes – Since the business is the same as the owner of the sole proprietorship, all profits or losses from the business are filed by the

Sole trader is where a business is run as an individual; so that all profits are their own after tax has been paid on them. Within a sole trader organisation it is possible to employ staff, as the sole trader only means that you own the business personally and do not actually have to work by yourself.

* Limited Liability - Unlike partnerships and sole proprietorships, corporate shareholders are not liable for any of the corporation's debts.

The choice of legal status for setting up a new company can be complex and is dependant on various tax, commercial and legal considerations (Accountingweb, 2014).

Financial statements are very important in potential investors, management of operator and other stakeholders to make decisions in the business of a company. Different users of financial statements may have different needs of financial information. So finding a proper format of financial statement is significant. This paper will particularly discuss two business models— sole traders and limited companies and their format of financial statements. First, it will give a brief introduction about sole traders and the characteristics of its format of financial statements. Then it will present the characteristics of limited companies and its format of financial statements. At last, the paper will discuss the advantages and disadvantages of each format of financial statements.

Sole trader-it’s a business that is owned by only one person and it can have one or more employees. This type of business organization often succeeds because the owner has total control of businees, the owner keeps all profit and it’s cheap to start-up,but also it can be difficult to raise financial,it may be difficult to specialise or enjoy economies of scale and can also have problems with continuity if sole trader retires or dies.

Is the most common business type, where the business is operated and owned by a single individual. In this type of business, the sole proprietor provides capital, does not share profit or loss and runs the business alone. As such, the business and the owner are indistinguishable for tax and legal purposes (Dlabay, 2011). To differentiate this business from other business types, a sole proprietorship is discussed under the following characteristics.

The sole proprietorship is the simplest form of business organization. A sole proprietorship is a business that is owned by an individual who is solely responsible for all aspects of the business. The owner is personally responsible for all debts of the business, even in excess of the amount invested. The business and its owner are thus considered the same entity.

A sole trader runs/ owns a business entirely by himself, meaning all the decisions fall on him/ her, this is good for the owner because if he does well all the profits will go to him/her because the business itself is 100% theirs. As I said before, all the profits in the business are the owners, (everybody likes a good pay day).

Corporation origin from the Latin word Corpus which means body. It is formed by a group of people and has separate rights and liability from those individual. In any means, corporation exists independently from its owner and this principle is called the doctrine of separate personality. Doctrine of separate personality is the basic and fundamental principle in a Company Law. This principle outline the legal relationship between company and its members. Company’s assets belong to the company not the shareholders as assets are the equity for creditors. Company must use up all its assets to pay off the creditors if it became insolvent. The same applies to the corporation’s debts. For limited liabilities company, the shareholder liability is limited which means that the shareholder is restricted to the number of shares they paid and not personally liable for the corporation’s debts. If the company does not have enough equity to pay off debts, the creditors cannot come after the shareholders. However, limited liability company can be very powerful when in hands who do fraud and on defeating creditors’ claims. Courts then can ignore the doctrine for exception cases and lifting the corporate veil. Lifting the corporate veil is a situation where courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s debts.

Private companies are seperate legal entities and have a limited liability, they are made up of at least one to a maximum of 50 members. There is safety to members in regards to debts, you will only pay the amount equivalent to your share in the company.

A sole proprietorship is a business that has a single owner who is responsible for making decisions for the company. The costs are minimal it only requires a business name fictitious, a bank account and a commercial license. The exclusive property does not have double taxes on profits, such as in other business structures as in corporations. All taxes are reported in the statement of the individual owner. The owner has unlimited liability for the business and vice versa because legally there is no difference between the owner and his business.

The legal entity system has profoundly affected the process of human economic and social development. Needless to say, the connotation of the legal entity system is very rich, and that the company has an independent personality and shareholders bear the limited liability is the two basic features (Tweedale, G., Flynn, L., 2007). Of course, the company 's independent personality is based on the separation of corporate property and shareholder property. Under this circumstance, the company shall enjoy their rights, fulfil obligations, and independently bear civil liability in its own name (L.C.B., 1992). However, with the development of commodity economy, and the deepening and extensive use of the legal entity system, the

Generally speaking, the sole proprietorship is the simplest and least expensive form of business structure. However, it provides no protection of the owner’s personal assets from claims, litigation and financial judgments.