Learning Outcomes• Describe the main features of sole traders,
partnerships, limited companies • Understanding the differences between sole
traders and partnerships• Understand the differences between
unincorporated businesses and limited companies• Recommend suitable forms of business
organisation to the owners and managers in a given situation
Reminder……Types of Organisations
Ownership Types
Private Sector Public Sector
Unincorporated
•Sole Trader
•Partnership
Incorporated
•Private Limited Company
•Public Limited Company
• Public Corporations
• Public Services
• Local Authorities
Profit Non-Profit
• Charities• Trade Unions• NGOs• Social
Organisations• Advocacy Orgs
Incorporation….. What does it mean?
• Incorporation is the forming of a new corporation (a corporation being a legal entity that is effectively recognised as a person under the law).
Legal BenefitsProtection of personal assets (Limited Liability)
Continuity (ownership can be transferred)
Profits taxed at corporate rates
Option to raise funds by selling shares
Company has a separate credit rating
Company can have a bank account
Why would each of these be useful?
Obligations of Incorporated Businesses
• To have at least one shareholder and at least one director
• To inform if there are any changes to the details of the company
• File company accounts and company tax return yearly
• To keep detailed financial records for at least 6 years after each financial year (or be fined)
• To file an annual return each year (currently costs £40)
UNINCORPORATED BUSINESSES
Let’s assume the business has decided against incorporation..
Incorporated V
Your options…..
If you want to own a business on your own you will be a SOLE TRADER
If you want to own a business with other people you will be aPARTNERSHIP
Owners of these types of business have UNLIMITED LIABILITY
Task…. 5 mins
• In pairs discuss and write 2 lists.
Reasons why someone would prefer to set up a business on their own….
Reasons why someone would prefer to set up a business with other people….
The benefits of being unincorporated
• Very easy to set up• Register as being self employed and you’re good
to go• None of the paperwork and associated costs of
setting up as a company
Rules of Partnerships….
• Can have 2-20 owners• At least 1 partner must have
UNLIMITED LIABILITY• Has the option of drawing up a
DEED OF PARTNERSHIP
Homework TaskConstruct a Deed of Partnership for the business including the following sections:•name of the business and details of its activities•names of partners and their duties and responsibilities (give reasons)•amount of capital provided by each partner•how the profits and losses will be shared out•explanation of how decisions will be made and any voting rights•arrangement for retirement, death or change of partners•Your challenge is to be interesting, not realistic!
Types of Companies
As a new business you could be a PRIVATE LIMITED COMPANY (LTD)
Later on you may decide to become a PUBLIC LIMITED COMPANY
Limited Companies
• Are Incorporated• Have Shareholders rather than
owners• May have from 1 up to thousands of
Shareholders• Have a Board of Directors
Task – 5 mins
• Using your textbook and/or the internet
• Find out the differences between Private Limited Companies and Public Limited Companies
Key Questions…..
• Why would a Private Limited Company want to become a Public Limited Company?
• Can any Ltd become a Plc?• What process would they have to go through to
become one?• Are there any cons of being a Public Limited
Company (as opposed to remaining a Ltd?)
A word from the lovely Richard Branson
Fortunately we're not a public company - we're a private group of companies, and I can do what I want.
What does he mean by this?
Task – Dell Delisting
• Open and read the article “Dell wins back his company’
• Answer the following questions....
• What is meant by the term delist?• Why have Dell and their competitors struggled in
recent years?• How does Michael Dell plan to turn the company
around?• Why does Michael Dell want to delist?• Why is there opposition to the delisting?
Task - Double Bubbles
• Complete the double bubble diagram comparing Sole traders and Partnerships
Homework: Complete the other two double bubble diagrams
• http://topics.nytimes.com/top/news/business/small-business/case-studies/index.html