GCSE Business Studies Business Ownership Structures Public Private

GCSE Business Studies. Business Ownership Structures Public & Private

Learning Objectives: • Identify different business structures • Explain unlimited liability & the implications of this on setting up a business • Explain the differences between Sole Traders & Partnerships

UK Business Ownership. Most UK Businesses are privately owned. This means: – They are owned by private individuals – These individuals risk their own money – The owners’ reward is the profit the business makes

Private Ownership Options • Sole Trader – 1 owner • Partnership – 2 or more people • Private Limited Companies – often a family run business with protection of limited liability • Public Limited Company – large organisations whose shares are traded on the stock exchange • Franchise – small business trading with the agreement of a large firm • Cooperatives – collectively owned by workers / customers

Public Ownership • This term is used for enterprises owned or run by the state. • The aim is to provide services needed by everyone, regardless of income or wealth Eg; health & education. • This is mainly financed through tax.

Examples of public ownership • Central government departments, Eg; Department of Health • Local authorities and councils. • Public organisations, Eg; BBC, Bank of England, British Nuclear Fuels

Liability • Businesses can have either unlimited liability. limited or • This depends on the type of business that is formed.

Unlimited Liability. • This means that the owner of the business has a higher level of risk. • The owner could lose not only the capital they had invested but also their personal assets to pay the business debts if the business failed. • Personal assets: » House » Car » Computer

Limited Liability. • This means that the owner/s of the business have their losses limited to the amount of capital they have invested within the business. • For Example: If you purchase £ 1000 of shares in M&S you only lose the maximum of £ 1000 if the company fails.

The Private Sector: • Sole Trader • Partnerships • Private Limited Companies • Public Limited Companies • Co-operatives • Franchises • 1 owner. • 2 – 20 owners. • 2 – 50 shareholders. • 2 – unlimited shareholders. • Consumer, retail or producer. • EG: The Body Shop.

Sole Trader. “A sole trader is a business owned and controlled by one person. Sole traders can operate under their own name and are responsible for the day to day running of the business. ”

The Key Points: • Sole Trader is referred to as a one person business. • Sole Traders own & control their own business. • The Sole Trader makes all the decisions and keeps all the profits. • A Sole Trader is the easiest form of business to set up. • The Sole Trader is the most common business in the UK.

Sole Traders Benefits • Easy to set up and give a personal service • Owner independent – can make quick decisions • Minimum of paperwork • Knows Customers helps avoid bad debt. • Can be flexible Drawbacks • Unlimited Liability • Long hours, no cover for holidays or sickness • Few employees so need multi-skilling • Capital may come from savings • Needs business skills • Business ends on death of the sole trader

Sole Trader Characteristics. • Hard working • Multi skilled • Dedicated / Self motivated- • Long hours to ensure all work is completed. • Not only satisfy customers but also run the business. • If you don’t do it who will.

Partnerships: The Facts. • Where two or more people run the business together. • Common form of business structure amongst professionals; lawyers/accountants/vets. • Everything is shared: decision making, work load, profits & losses. • Deed of partnership sets out the aims of the business and the duties of each partner. This should prevent disagreements.

Types of Partnership. • There can be two types of partners; – Each partner is equal in the running of the business and equally share the risks and losses. – A limited partnership where one of the partners has limited liability and is not involved in the day to day running of the business.

Partnership Benefits § Easy to set up. § Partners bring extra capital & expertise. § Shared responsibility of running the business & work load. § Division of labour means that the partners can specialise in what they are good at. Drawbacks § § Unlimited liability; each partner is responsible for the debts of the business. Lack of continuity; if one partner dies or resigns the partnership is dissolved. Partners can take decisions without consulting each other. Disagreements.

Deed of Partnership. • • • The Deed of Partnership is a legally binding contract between the partners. This document outlines each partners duties & responsibilities within the business. This can help prevent any future disagreements about the running of the business.

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Task You are writing a newspaper article for a local business magazine. You have 1 page of A 4 to fill. Write an article about the 2 types of ownership Sole Traders and Partnerships You need to include all of the key points and explain which method of ownership you think is best for a small business