POA theory

POATHEORY TradingBusinessAtradingbusinessisabusinesswhichbuysgoodsfromsuppliersandsellsittoitscustomers.Atradingbusinesshasagrossprofit,salesreturnandcostofsales ServiceBusinessAservicebusinessisabusinesswhichsellsitsservicestothebusiness.Aservicebusinessonlyhasservicefeerevenue TypesofbusinessandownershipsSoleProprietorship CapitalStructure ItisownedbyonepersonwhosolelycontributestothecapitaltosetupthebusinessBanksandotherlendersarelesslikelytolendmoneytoanspduetothelackofpersonalassetsthatserveascollaterals.Hencetheaccesstofundsisnormallylimitedtothepersonalfundsoftheowner Risks Whenanspincursdebtsandlosses,theownerisobligedtopaythemusingherorherpersonalassets Managementofthebusiness 1. Thesoleownerrunsthebusinessbyhimselforherselfandhasabsolutecontroloverthebusinessandheorshecanhireprofessionalstohelphimorherout2. Itexistsuntiltheownerisaliveandwillingtocontinueoperations3. Thesoleownercantransferhisofherownershiptoanotherpersonbyupdatingtheparticularsofthenewownertonotifythecorporateregulatoryauthorityofthetransferofownership4. AnSPhasminimalAdministrativedutiestoadhereto LimitedLiabilityPartnership(LLP) CapitalStructure ItisownedbytwoormorepartnerswhereeachpartnercontributescapitaltosetupthebusinessBanksandotherlendersaremorelikelytolendmoneytoanLLPduetomoresourcesofpersonalandassetsfromownersandbusinessassets.Alternativelytheycanalsojoinmorepeopleaspartnersandcontributetothecapital. Risks WhenanLLPincursdebtsandlosses,theownersarenotpersonallyliableforthem,HoweverwhenanLLPincursdebtsandlossesduttothewrongfulactionsthatpartnerispersonallyliableforthosedebtsandlossesandtheotherpartnersarenotaffected Managementofthebusiness Usuallythecontroloverthebusinessissharedamongthepartnerswithatleastonepartnerheavilyinvolvedinmanagingthebusiness.Itexistsuntilwounduporstruckoff.Allownersneedtoagreetotheadditionorwithdrawalofownersbeforethecorporateregulatoryauthorityacknowledgesthetransferofownership.AnLLPhasfewregulatorydutiestoadhereto.Howeveroneoftheownershavetosubmitanannualdeclarationstatingwhetherthebusinessisabletopaythedebtsandlossesduringthenormalcourseofthebusiness.

Privatelimitedcompany(PLC) CapitalStructure Itisownedby50orlessshareholderswhereeachshareholderbuyssharesandcontributescapitalBanksandotherlendersaremorelikelytolendmoneytoacompanyduetomoresourcesofbusinessofhighvaluethatserveascollaterals.Alternatively,thecompanycanissuemoresharesandraisefunds Risks Whenacompanyincursdebtsandlosses,Theshareholdersarenotobligedtopaythemusingtheirpersonalassetsandmaylosetheirdividends.Intheworstcasescenario,theywouldhavetoforfeittheirinvestment. Managementofthebusiness Theshareholdershavenocontroloverthebusinessunlesstheyarepartofthemanagementteam.Thecompanyhiresprofessionalstomanagethebusinessonbehalfofshareholders.Itexistsforeveruntilwounduporstruckoff.ShareholderscanpaystampdutytothetaxauthoritytogivetheirsharestoanotherpersonororganisationTheyhavestatutoryrequirementstocomplywithandfileannualfinancialreports. Different stakeholdersandtheir decis