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Business Ownership

The Private Sector

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Business Ownership

Sole Trader:

Owned, financed and controlled by one

individual but can employ other staff

Common in local building firms, small

shops, restaurants, butchers, etc.

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Business Ownership

Sole Traders: Advantages

Easy to set up Personal incentive

keep all the profits make key decisions

high degree of control Flexibility Ability to offer personal service

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Business Ownership

Sole Traders: Disadvantages

Unlimited Liability Limited access to capital Potential for long hours Pressure of being solely responsible Lack of continuity business ceases

once owner dies

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Business Ownership

Partnerships:

Owned, financed and controlled by upwards

of 2 partners Terms of Partnership agreed through contract

Bound by the terms of the Partnership Act 1890

Common in professions lawyers, accountants,architects, surveyors, estate agents, vets, etc.

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Business Ownership

Partnerships: Advantages

Greater access to capital Shared responsibility Greater opportunity for specialisation Easy to set up

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Business Ownership

Partnerships: Disadvantages

Unlimited Liability(However since 2001, Partnerships can apply to be Limited Partnerships)

All partners liable for the debts of the others Partnership dissolved on death of one partner Potential for conflict Decisions of one partner binding on the rest

Limited access to capital

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Business Ownership

Limited Companies: Private Limited Company (Ltd) Owned by between

1 and 50 shareholders

PublicL

imited Company (PL

C) Owned by minimumof 2 but no maximum number of shareholders

Has a separate legal identity the company can sueand be sued

More complex to set up

Minimum share capital of 50,000

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Business Ownership

Limited Companies:Must Register with Registrar of Companies at Companies House

Memorandum of Association

Details of the nature, purpose and structure of the company Articles of Association

Details of the internal rules of the company

Certificate of Incorporation allows the company to trade Shareholders have limited liability can only lose what

they agreed to put into the company no personal liability PLCs shares traded on Stock Exchange LTDs shares only bought and sold with agreement ofexisting shareholders

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Business Ownership

Limited Companies Issues

Divorce between ownership and control

Potential for diseconomies of scale communication, decision making, etc. Must publish accounts PLCs shareholders may be large institutions

pension funds, insurance companies, etc.

PLCs - Share value subject to volatility affects company value

PLCs can be large, complex, possess marketpower

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Business Ownership

Co-operatives:Ownership, finance and control in hands of members

Exists for the benefit of membersConsumer co-ops members buy goods in bulk,sell to members, divide profits between members

Worker co-operatives workers buy thebusiness and run it decisions and profits shared

by membersProducer co-operatives producers organisedistribution and sale of products themselves

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Business Ownership

Franchises:Method of business ownership backed by established brand name

Owner gets to run a business with less risk

Owner buys the right to use the established companys name,format products, logos, display units, methods, etc.

Speedy way for business to expand Become very popularOwner (Franchisee) responsible for debts, pays a royalty to

owners of the brand, keeps any remaining profit Franchisee pays a fee for the purchase of the franchise Common franchises Body Shop, McDonalds, Costa Coffee,

Subway