Types of Business Entities

Sole proprietorship
A sole proprietorship is the simplest business entity, with one person (or a
married couple) as the sole owner and operator of the business. If you launch
a new business and are the only owner, you are automatically a sole
proprietorship under the law. There’s no need to register a sole proprietorship
with the state, though you might need local business licenses or permits
depending on your industry.
Freelancers, consultants and other service professionals commonly work as
sole proprietors, but it’s also a viable option for more established businesses,
such as retail stores, with one person at the helm.
Pros of sole proprietorship
 Easy to start
 No corporate formalities or paperwork requirements, such as meeting
minutes, bylaws, etc.
 You can deduct most business losses on your personal tax return.
 Tax filing is easy

Cons of sole proprietorship

 As the only owner, you’re personally responsible for all of the business’s debts
and liabilities — someone who wins a lawsuit against your business can take
your personal assets (your car, personal bank accounts, even your home in
some situations).
 There’s no real separation between you and the business, so it’s more difficult
to get a business loan and raise money (lenders and investors prefer LLCs or
corporations).
 It’s harder to build business credit without a registered business entity.
Sole proprietorships are by far the most popular type of business structure in
the U.S. because of how easy they are to set up. There’s a lot of overlap
between your personal and business finances, which makes it easy to launch
and file taxes. The problem is that this same lack of separation can also land
you in legal trouble. If a customer, employee or another third party
successfully sues your business, they can take your personal assets.
 Sources of capital

Personal Funds
Personal savings such as an inheritance or rainy day fund may be the only investment
option available to you in the early days if you don't yet have any profits to reinvest in
the business or any personal assets to guarantee a bank loan.

Advantages:

 Cheap money –

there are no debt repayment obligations or other conditions attached to the

investment. * You can use the money however you want to start and grow the
business.

Disadvantages:

 There's a limit on how much an individual can invest. For many sole

proprietors, their savings will not be enough to cover the business' capital
requirements.
 Extremely risky –if the business fails, your next egg is gone forever.

Borrowing From Relatives and Friends

Friends and relatives are the people most likely to believe in you and are common
sources of investment for sole proprietorship businesses.

Advantages:

 Typically, loans have low interest rates and favorable repayment terms.

 They're quicker and easier to arrange than a traditional bank loan.

Disadvantages:

 Lack of clarity regarding the terms of the loan, especially if it is not properly

documented.
 You risk destroying your personal relationships if the business venture breaks down.

Reinvesting Retained Profits

Retained profits are the profits made in previous years of trading over and above what
you need to finance your day-to-day expenses.
 Advantages:

 Cheap source of finance –

the money is already yours. * No loan applications or mortgaging required.

Disadvantages:

 Not every sole proprietor will be generating sufficient profit to plug the surplus back
into the business.
 Startups typically do not have any earnings yet so cannot use this finance method.

Grants for Sole Proprietors

Grants are a source of funding without any obligation to pay back. However, you
may be up against hundreds of other businesses who are vying for a share of the
grant pot, and you may be severely limited in the scope of what you are permitted to
spend the money on. Make sure you known all the limitations and restrictions
associated with the grant before accepting it.

Advantages:

 Grants are essentially free money –

it is not a loan, and it doesn't have to be repaid. * _The prestige of winning a

coveted grant can boost the reputation of your business.

Disadvantages:

 Grant applications can suck up a huge amount of your time and money and there's
no guarantee that your application will be successful.
 The program may be massively oversubscribed which means you cannot bank on
grant money as a primary source of investment.

Bank Loans
Bank loans are among the best-known sources of finance for sole traders and
partnerships, and they can give you access to a much larger pool of cash that you
potentially can raise from family and friends. On the downside, the bank will use
your personal assets and credit score as the basis for approving the loan. Most
banks will insist that you put up collateral_, such as your home,_ to guarantee the
loan. The bank can seize and sell these assets if the business venture does not go
exactly as planned.
 Advantages:

 Monthly repayments are generally fixed for a specific number of years_, which is

good for budgeting._
 Helps build business credit.

Disadvantages:

 Requires strong personal credit to qualify.

 Typically requires collateral – your personal assets are at risk if you do not keep up
the repayments.

Credit Card Financing

A credit card allows you to borrow up to a pre-agreed limit, then pay the balance back
over time. They're a useful way to cover a temporary cash flow shortage, for example,
when the payment of a large invoice hasn't come in yet but you need to purchase
some additional inventory. Credit cards charge compound interest, which means the
monthly interest charge is rolled into the account balance each month and you pay
"interest on the interest." Costs can spiral out of control if you're not paying off
the balance each month, 

Advantages:

 One of the fastest-to-arrange sources of capital for a sole proprietorship without

putting up collateral or doing a lot of paperwork.
 Helps build business credit.

Disadvantages:

 Compound interest and other charges make rates much higher than bank loans.
 Charges can stack up very quickly if you're not paying down the balance each month.

Sale of Inventory and Assets

If your businesses is already trading, selling old inventory – often at a discounted
price – is a great way to raise the money you need. Customers like a bargain, and
holding an "end of season" sale can help attract new customers as well as clear up
some storage space. For asset-heavy businesses, selling a vehicle you no longer use
or some surplus machinery works the same way. For example, you might trade in
your old vehicle in part exchange for a new one.

Advantages:

 _It's cheap money, s_ince you already own the assets and inventory.
 Discounted inventory sales could bring new customers to your door.

Disadvantages:

 Discount pricing reduces your profit margins and may leave you with less cash for
reinvestment.
 The market is small for many types of business assets (machinery, buildings) which
means it can take a long time to find a buyer.

Trade Credit Financing

Trade credit is where suppliers deliver the goods you need now but give you
a number of days' grace before requiring payment. Typical terms are net-
30 or net-60 days, which means you have an additional 30 or 60 days to settle the
invoice.

Advantages:

 Maintain a cash cushion by putting off paying for inventory until you've sold it to
customers.
 Discounts may be available for fast payment.

Disadvantages:

 Requires good trading relationships with your suppliers. A start-up may not be able
to negotiate lengthy trade credit periods as they do not yet have a track record of timely
payments.
 Fees, charges and loss of trade privileges might apply if you do not pay within the
agreed period.

General partnership
Partnerships share many similarities with sole proprietorships — the key
difference is that the business has two or more owners. There are two kinds of
partnerships: general partnerships, or GPs, and limited partnerships, or LPs. In
a general partnership, all partners actively manage the business and share in
the profits and losses.
 Pros of general partnership
 They share ideas and responsibilities
 No corporate formalities or paperwork requirements, such as meeting
minutes, bylaws, etc.
 You don’t need to absorb all the business losses on your own because the
partners divide the profits and losses.
 Owners can deduct most business losses on their personal tax returns.

Cons of general partnership

 Each owner is personally liable for the business’s debts and other liabilities.
 In some states, each partner may be personally liable for another partner’s
negligent actions or behavior (this is called joint and several liability).
 Disputes among partners can unravel the business (though drafting a solid
partnership agreement can help you avoid this).

Most people form partnerships to lower the risk of starting a business. Instead
of going all-in on your own, having multiple people sharing the struggles and
successes can be very helpful, especially in the early years.
If you do go this route, it’s very important to choose the right partner or
partners. Disputes can seriously limit a business’s growth, and many state laws
hold each partner fully responsible for the actions of the others. For example,
if one partner enters into a contract and then violates one of the terms, the
third party can personally sue any or all of the partners.

Limited partnership
Unlike a general partnership, a limited partnership, or LP, is a registered
business entity. To form a limited partnership, therefore, you must file
paperwork with the state. In an LP, there are two kinds of partners: those who
own, operate and assume liability for the business (general partners), and
those who act only as investors (limited partners, sometimes called “silent
partners”).
Limited partners don’t have control over business operations and have fewer
liabilities. They typically act as investors in the business and also pay fewer
taxes because they have a more tangential role in the company.
 Pros of limited partnership
 An LP is a good option for raising money because investors can serve as
limited partners without personal liability.
 General partners get the money they need to operate but maintain authority
over business operations.
 Limited partners can leave anytime without dissolving the business
partnership.

Cons of limited partnership

 General partners are personally responsible for the business’s debts and
liabilities.
 More expensive to create than a general partnership and requires a state
filing.
 A limited partner may also face personal liability if they inadvertently take too
active a role in the business.
Multi-owner businesses that want to raise money from investors often do well
as LPs because investors can avoid liability.
You might come across yet another business entity structure called a limited
liability partnership, or LLP. In an LLP, none of the partners have personal
liability for the business, but most states only allow law firms, accounting
firms, doctor’s offices and other professional service firms to organize as LLPs.
These types of businesses can organize as an LLP to avoid each partner being
liable for the other’s actions. For example, if one doctor in a medical practice
commits malpractice, having an LLP lets the other doctors avoid liability.

Sources of capital
1.Contribution of each partner
Advantages;

 The partner would not want collateral to lend money to the business.
 There is no paperwork required.
 The money need not necessarily be paid back to the partner on time.
 Can be interest free or carry a lower rate of interest since the partner provides the loan.

Disadvantages;

 It is not an option where very large amounts of funds are required.

 Since it is an informal agreement, if the partner demands the money back in a short
notice it might cause cash flow problems for the business.
 2.Bank overdraft
Bank overdraft is a short term credit facility provided by banks for its current account
holders. This facility allows businesses to withdraw more money than their bank account
balances hold. Interest has to be paid on the amount  overdrawn. Bank overdraft is the
ideal source of  finance for short-term cash flow problems.
Advantages;

 No security is needed for a  bank overdraft.

 Ideal for short-term cash-flow deficits.
 Easy and quick to arrange.
 Interest is only paid when overdrawn and on the exact amount needed.
 Since overdraft is a short term debt it is not included in calculating the firm’s gearing
ratio.

Disadvantages;

 There is a limit to the amount that can be overdrawn.

 Interest has to be paid on an overdraft that is calculated on a daily basis and sometimes
the bank charges an overdraft facility fee too.
 Overdrafts are meant to cover only short-term financing and are not a permanent or
long-term source of finance
 Interest is calculated on a variable rate and therefore it is difficult to calculate the cost of
borrowings.
 Overdrafts can be recalled by the bank at any time if not stated in the agreement.

3.Ploughing back profit / Retained profits

This occurs when the partners agree to take back part of the profit into the
business in order to expand the business
Advantages;

 They need not be paid back since it is the organisation’s own savings.

 There are no interest payments to be made on the usage of retained profits.
 The company’s debt capital does not increase and thus gearing ratio is maintained.
 There are no costs raising the finance such as issuing costs for ordinary shares.
 The plans of what is to be done with the money need not be revealed to outsiders because they are not
involved and therefore privacy can be maintained.
 Disadvantages;

 There maybe opportunity costs involved.

 Retained profits are not available for starting up businesses or for those businesses that have been
making losses for  a long period.

4 .Trade creditors

5.Admission of new partner.

This is when a new partner is admitted into the business

6.Loans
Loans are amounts of money borrowed from banks or other financial institutions for
large and long-term business projects such as the development or expansion of the
business. However loans can be substituted by other alternative sources of
finance which are more suitable.
Advantages;

 Large amounts can be borrowed.

 Suitable for long-term investments.
 The lender has no say on how the money is spent.
 Need not be paid back for a fixed time period and banks do not withdraw at a short
notice.
 Interest rates are lower than for bank overdrafts and are set in advance.

Disadvantages;

 Collateral is needed.
 The amount borrowed has to be repaid at the agreed date.
 Interest is charged.
 Loans will affect a company’s gearing ratio.

Limited liability company

 A limited liability company takes positive features from each of the other
business entity types. Like corporations, LLCs offer limited liability protections.
But, LLCs also have less paperwork and ongoing requirements, and in that
sense, they are more like sole proprietorships and partnerships.
Another big benefit is that you can choose how you want the IRS to tax your
LLC. You can elect to have the IRS treat it as a corporation or as a pass-
through entity on your taxes.
Pros of LLC
 Owners don’t have personal liability for the business’s debts or liabilities.
 You can choose whether you want your LLC to be taxed as a partnership or
as a corporation.
 Not as many corporate formalities compared to LLCs

Cons of LLC
 It’s more expensive to create an LLC than a sole proprietorship or partnership
(requires registration with the state).
LLCs are popular among small business owners, including freelancers, because
they combine the best of many talents.

Sources of capital for Limited

liability companies
Finance is essential for a business’s operation, development and expansion. Finance is the core limiting
factor for most businesses and therefore it is crucial for businesses to manage their financial
resources properly. Finance is available to a business from a variety of sources both internal and
external.  It is also crucial for businesses to  choose the most appropriate source of finance for its several
needs as different sources have its own benefits and costs.

1. Personal Savings
This is the amount of personal money an owner, partner or shareholder of a business has at his disposal
to do whatever he wants.When a business seeks to borrow the personal money of a
shareholder, partner or owner for a business’s financial needs the source of finance is known as
personal savings.
 Advantages;

 The owner would not want collateral to lend money to the business.
 There is no paperwork required.
 The money need not necessarily be paid back to the owner on time.
 Can be interest free or carry a lower rate of interest since the owner provides the loan.

Disadvantages;

 Personal savings is not an option where very large amounts of funds are required.
 Since it is an informal agreement, if the owner demands the money back in a short notice it might cause
cash flow problems for the business.

2. Retained Profits
Retained profits are the undistributed profits of a company. Not all the profits made by a
company are distributed as dividends to its shareholders. The remainder of the profits after all
payments are made for a trading year is known as retained profits. This remainder of finance is
saved by the business as a back-up in times of financial needs and maybe used later for a
company’s development or expansion. Retained profits are a very valuable no-cost source of
finance.

Advantages;

 They need not be paid back since it is the organisation’s own savings.

 There are no interest payments to be made on the usage of retained profits.
 The company’s debt capital does not increase and thus gearing ratio is maintained.
 There are no costs raising the finance such as issuing costs for ordinary shares.
 The plans of what is to be done with the money need not be revealed to outsiders because they are not
involved and therefore privacy can be maintained.

Disadvantages;

 There maybe opportunity costs involved.

 Retained profits are not available for starting up businesses or for those businesses that have been
making losses for  a long period.

3. Working Capital
Working capital refers to the sum of money that a business uses for its daily activities. Working
capital is the difference of current assets and current liabilities (i.e. Working capital = Current
assets — Current liabilities). Proper working capital management is also vital as it is also
a source of finance for a business
 Advantages;

 Since it is an internal source of  finance there are no costs involved.

 No repayment is needed.
 External parties cannot influence business  decisions.
 Will not increase debt capital of the firm so gearing ratio is maintained.

Disadvantages;

 Opportunity costs are involved.

 Is not suitable for  long term investments.
 Working capital cannot raise large amounts of funds.
 Total risk is undertaken by the company.
 Using working capital as a source of finance will affect the current ratio of the business

4. Sale of Fixed Assets

Fixed assets are the assets a company that do not get consumed in the process of production. Some
examples of fixed assets are land and building, machinery, vehicles, fixtures and fittings and
equipment. Sometimes where the fixed asset is a surplus and is abandoned, it can be sold to raise
finance in demanding times for the business. Otherwise businesses may choose to stop offering certain
products and sell its fixed assets to raise finance. Selling fixed assets reduces the production capacity of
a business affecting a  business’s return.

Advantages;

 Funds are again raised by the business itself and therefore need not be paid back.
 No interest payments are required.
 Large amounts of finance can be raised depending on the fixed asset sold.
 Would be the ideal source of finance if it was for an asset replacement.

Disadvantages;

 If the asset is sold then the business would lose opportunities to generate income from it.
 If the business wants to buy a similar asset later on it may cost more than it was sold for.
 If the asset is sold and the money is spent without return then the business is broke.
 The asset may be able to generate more income than the purpose it was sold for.

5. Ordinary Share Issue

Ordinary shares also known as equity shares are a unit  of  investment in a company. Ordinary
shareholders have the privilege of  receiving a part of company profits via dividends which is based on
the value of shares held by the shareholder and the profit made for the year by the company. They also
 have  the right to vote at general meetings of  the company. Companies can issue ordinary shares in
order to raise finance for long-term financial needs.

Advantages;

 The amount need not be paid back — it is a permanent source of capital.

 Able to raise large amounts of finance.
 If the company follows a rational dividend policy it can create huge reserves for its development
program.
 The dividends need to be paid only if the company makes a profit.
 No collateral is required for issuing shares.
 It will help reduce gearing ratio

Disadvantages;

 Issuing shares is time consuming.

 It incurs issuing costs.
 There are legal and regulatory issues to comply with when issuing shares.
 Possible chances of takeover where an investor buys more than 50% of the total issued shares value.
 Groups of equity shareholders holding majority of shares can manipulate the control and management
of the company.
 May result in over-capitalization where dividend per share falls.
 Once issued the shares may not be bought back and therefore the capital structure cannot be changed.

6. Preference Share Issue

Preference shares are another type of shares. Preference shareholders receive a fixed rate of dividends
before the ordinary shareholders are paid. Preference shareholders do not have the right to vote at
general meetings of the company. Preference shares are also an ownership capital source of finance.
There are several types of preference shares. Some of them are Cumulative preference share,
Redeemable preference share, Participating preference share and Convertible preference share.

Advantages;

 Have no voting rights and thus the management can retain control over the affairs of the company.
 Preference shareholders need not be paid if the company makes a loss.
 Even if the company makes large profits preference share holders need to be paid only a fixed rate of
interest.
 Has other benefits similar to ordinary share issue such as — no repayment required, large amounts of
capital can be raised, permanent source of capital and no collateral required.
 Redeemable preference shares can be redeemed.

Disadvantages;
 Even if the company makes a very small profit it will have to pay the fixed rate of dividend to  its
preference shareholders.
 Preference shares are usually cumulative and thus twice the amount must be paid the following year if
dividends are not paid on the year they need to be  paid.
 Taxable income is not reduced by preference dividends unlike debentures where interest paid reduces
taxable income.
 Have other drawbacks similar to ordinary share issues such as the cost, time consumption and  legal
requirements.

7.   Debentures
Debentures are issued in order to raise debt capital. Debenture holders are not owners but long-term
creditors of the company. Debenture holders receive a fixed rate of interest annually whether
the company makes a profit or loss. Debentures are issued only for a time period and thus the company
must pay the amount back to the debenture holders at the end of  the agreed period. Debentures can
be secured,unsecured, fixed or floating.

Advantages;

 Debenture holders do not have rights to vote at the company’s general meetings.

 Tax benefits — debenture interests are treated as expenses and charged against profits in the profit and
loss account.
 Debentures can be redeemed when the company has surplus funds.

Disadvantages;

 Debenture interests have to be paid regardless the company makes a profit or loss.
 The money borrowed has to be paid back on an agreed date.

8. Bank Overdraft
Bank overdraft is a short term credit facility provided by banks for its current account holders. This
facility allows businesses to withdraw more money than their bank account balances hold. Interest has
to be paid on the amount  overdrawn. Bank overdraft is the  ideal source of  finance for short-term cash
flow problems.

Advantages;

 No security is needed for a  bank overdraft.

 Ideal for short-term cash-flow deficits.
 Easy and quick to arrange.
 Interest is only paid when overdrawn and on the exact amount needed.
 Since overdraft is a short term debt it is not included in calculating the firm’s gearing ratio.
 Disadvantages;

 There is a limit to the amount that can be overdrawn.

 Interest has to be paid on an overdraft that is calculated on a daily basis and sometimes the bank
charges an overdraft facility fee too.
 Overdrafts are meant to cover only short-term financing and are not a permanent or long-term source
of finance
 Interest is calculated on a variable rate and therefore it is difficult to calculate the cost of borrowings.
 Overdrafts can be recalled by the bank at any time if not stated in the agreement.

9. Loans
Loans are amounts of money borrowed from banks or other financial institutions for large and long-term
business projects such as the development or expansion of the business. However loans can
be substituted by other alternative sources of finance which are more suitable.

Advantages;

 Large amounts can be borrowed.

 Suitable for long-term investments.
 The lender has no say on how the money is spent.
 Need not be paid back for a fixed time period and banks do not withdraw at a short notice.
 Interest rates are lower than for bank overdrafts and are set in advance.

Disadvantages;

 Collateral is needed.
 The amount borrowed has to be repaid at the agreed date.
 Interest is charged.
 Loans will affect a company’s gearing ratio.

10. Hire Purchase/Instalment Buying

Hire purchase allows a business to use an asset without paying the full amount to purchase the asset.
The hire purchase firm buys the asset on behalf of the business and gives the business the sole usage of
the asset. The business on its part must pay monthly payments to the hire purchase firm amounting to
the total value of  the asset and charges of  the hire purchase firm. At the end of the payment period the
business has the option of  purchasing the asset for a nominal value.

Advantages;

 The business gains use of the asset before paying the asset’s value in full.
 The payment is made in affordable installments.
 Hire purchase installments are taxable expenditures.
 At the end of the payments ownership of the asset is transferred to the company.
 Payments can be made from the asset’s usage and return of the asset.

Disadvantages;

 Ownership remains with the lender until the last payment is made.
 The asset will cost the company more than the original value.
 If payments are not made on time the lender has the right to repossess the asset.
 If the asset is required to be replaced due to breakdown or because it is out-dated in which case the
payment may still have to be made and the asset replaced.

11. Lease
In a lease the leasing company buys the asset on behalf of the business and the asset is then provided
for the business to its use. Unlike a hire purchase the ownership of the asset remains with the
leasing company. The business pays a rent throughout the leasing period. The leasing firm is known as
the lessor and the customer as lessee. Leasing is of two types, namely Finance lease and  Operating
lease.

Advantages;

 The amount in full need not be paid in order to start using the asset.
 The total cost and the lease period is pre-determined and thus helps with budgeting cash flow.
 In an operating lease, payments are made only for the usage duration of the asset.
 Lease is inflation friendly where the agreed rate is paid even after five years when other costs increase
due to  inflation.
 It is easier to obtain  a lease than a commercial loan.

Disadvantages;

 The ownership of the asset remains with the lessor even after payments but however in a finance lease
the option is provided to buy the asset at a nominal value.
 In a finance lease the lessee ends  up paying more than the  value of  the asset.
 Lease cannot be terminated whenever at lessee’s  will.

12. Grants
Grants are funding given to businesses for programs or services that benefit the community or public at
large. Grants can be given by the government or private firms.

Advantages;
 Grants do not have to be paid back.
 There are no costs involved in obtaining a grant.

Disadvantages;

 Grants are given on certain restrictions and laws imposed by the government.

 Not all organisations are eligible for grants.
 Grants are given freely and therefore are very competitive because lots of firms try for the same source
of fund.

13. Venture Capital

Venture capital is the capital that is contributed at the initial stages of an uncertain business. The chance
of failure of the business is great while there is also a possibility of providing higher than average return
for the investor. The investor expects to have some influence over the business.

Advantages;

 Venture capitalists invest large sums of money in the business.

 They may also bring a lot of experience and expertise along with the money.
 Since they become owners by investing in the business they have equal interests in the business’s
success.
 Venture capitalists are only periodical investors wanting to exit the business at some stage.

Disadvantages;

 The profits will be shared with the investor.

 Acquiring venture capitals is a lengthy and complex process where a business plan and financial
projections must be submitted to the potential venture capitalist.
 As an owner of the business the venture capitalist may want to influence the strategic decisions and
take control of the  business.

14. Factoring
This is where the factoring company pays a proportion of the sales invoice of the business within a short
time-frame to the business. The remainder of the money is paid to the business when the
factoring company receives the money from the business’s debtor. The remainder of the money will be
paid only after deducting the factoring company’s service charges. Some factoring companies even offer
to maintain the sales ledger of the business.

Advantages;

 A large proportion of money is  received within a short time-frame.

 The sales ledger of the business can be outsourced to the factor.
 The money collections from debtors are undertaken by the factoring company.
 Helps a business to have a smooth cash flow operation.
 Non-recourse factoring protects the client company from bad debts.

Disadvantages;

 The business has to pay interests and fees for the factor for its services.
 The cost will be a reduction on the company’s profit margin.
 Lack of privacy since the sales ledger is maintained by the factor.
 Costumers would not like factoring companies collecting debts from them.

15. Invoice Discounting

In invoice discounting the client company send out a copy of the invoice to the invoice
discounting firm. The client then receives a portion of the invoice value. In contrast to factoring,
the client company collects the money from its debtors. Once the payment is received it is
deposited in a bank account controlled by the invoice discounter. The invoice discounter will
then pay the remainder of the invoice less any charges to the client.

Advantages;

 The client company receives the money in a short period.

 There is some amount of privacy since the sales ledger is maintained by the client company and only
some invoices are submitted for immediate cash.
 Less costly than factoring since the sales ledger is maintained by the client company.
 Unlike factoring customers are not aware of invoice discounting since the debt collection is undertaken
by the  client firm.

Disadvantages;

 Debt should be collected by the client company itself and thus resources and time are wasted in debt
collection.
 Sales ledger has to be maintained by the client company itself.