Page 1: Business growth
Many business owners regard business growth as desirable. So, too, do governments. There are many ways in which businesses can grow e.g. by:
- increasing the value and volume of their sales
- employing more people
- producing a wider range of goods and services
- expanding to larger and better premises
- starting to export to other countries.
Another possible route to growth is for a business to change its ownership structure e.g. by becoming a company or a limited partnership. In the UK, large numbers of small enterprises operate as sole traders (one owner), or ordinary partnerships (small number of partners). These forms of business are easy to set up but are faced with having unlimited liability. This means that their owners are personally liable for all debts incurred by the business. They may have to sell off personal possessions to cover business debts.
For limited companies and limited liability partnerships, their owners' liability extends only to the amount they have invested in a company or limited partnership.
By growing, businesses give themselves several advantages.
- by producing and selling on a larger scale, businesses can reduce their average costs and thereby increase profitability
- seeing their business grow motivates the owners towards even greater effort
- larger companies can raise finance more easily. For example, by becoming a public limited company (PLC) a business is able to raise funds for expansion by selling shares which are traded on the Stock Exchange.
Of course, not all companies 'go public'. Many small and medium sized enterprises (SMEs) stay as private companies in which shares can be traded only with the permission of the Board of Directors. The UK tax system treats all businesses alike, regardless of their legal form. All businesses including sole traders need to register for tax purposes. Which taxes they pay, and how much, varies with the business's turnover.