http www bized ac uk Business Ownership The

http: //www. bized. ac. uk Business Ownership The Private Sector Copyright 2006 – Biz/ed

http: //www. bized. ac. uk 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. Copyright 2006 – Biz/ed

http: //www. bized. ac. uk 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 Copyright 2006 – Biz/ed

http: //www. bized. ac. uk 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 Copyright 2006 – Biz/ed

http: //www. bized. ac. uk 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. Copyright 2006 – Biz/ed

http: //www. bized. ac. uk Business Ownership Partnerships: Advantages • • Greater access to capital Shared responsibility Greater opportunity for specialisation Easy to set up Copyright 2006 – Biz/ed

http: //www. bized. ac. uk 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 Copyright 2006 – Biz/ed

http: //www. bized. ac. uk Business Ownership Limited Companies: – Private Limited Company (Ltd) Owned by between 2 and 50 shareholders – Public Limited Company (PLC) Owned by minimum of 2 but no maximum number of shareholders – Has a separate legal identity – the company can sue and be sued – More complex to set up – Minimum share capital of £ 50, 000 Copyright 2006 – Biz/ed

http: //www. bized. ac. uk 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 of existing shareholders Copyright 2006 – Biz/ed

http: //www. bized. ac. uk 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 market power Copyright 2006 – Biz/ed

http: //www. bized. ac. uk Business Ownership Co-operatives: Ownership, finance and control in hands of ‘members’ • Exists for the benefit of ‘members’ • Consumer co-ops – members buy goods in bulk, sell to members, divide profits between members • Worker co-operatives – workers buy the business and run it – decisions and profits shared by members • Producer co-operatives – producers organise distribution and sale of products themselves Copyright 2006 – Biz/ed

http: //www. bized. ac. uk 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 company’s name, format products, logos, display units, methods, etc. • Speedy way for business to expand • Become very popular • Owner – (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, Mc. Donalds, Costa Coffee, Subway Copyright 2006 – Biz/ed