CHAPTER 16 BUSINESS OWNERSHIP

2 R. Delaney Sole Traders A sole trader is a person who owns, manages and provides the money (capital) for a business. ADVANTAGES 1.The owner has full control over the business. 2.The sole trader keeps all the profit. 3.It is easy and cheap to set up a sole trader business. 4.Sole traders may find it easy to adapt their business hours to suit the needs of their customers.

3 R. Delaney Sole trader Disadvantages 1.The business has unlimited liability. 2.The sole trader must bear losses alone. 3.The business may find it difficult to expand due to lack of capital. 4.The owner has to make all business decisions alone. 5.The business ceases to exist when the owner dies. Local boutique

4 R. Delaney Private Limited Companies 1.Private limited companies are owned by shareholders. 2.The money invested in the company by the shareholders is called its capital. 3.This capital is owed to the shareholders. 4.If the company makes a profit each shareholder receives a dividend based on the number of shares they hold in the company. 5.The shareholders have limited liability, i.e. they can’t lose their private property to pay for the debts of the company.

5 R. Delaney Private Limited Companies Characteristics 1.A minimum of 1 and a maximum of 50 shareholders. 2.Shares can’t be sold to the general public. 3.A shareholder must obtain permission to sell his or her shares to a new shareholder. 4.They must have the word Limited (Ltd) or Teoranta (Teo) after their name. 5.They do not have to publish accounts.

6 R. Delaney Advantages of Limited Companies 1.A limited company can expand more easily than a sole trader. 2.All the shareholders have limited liability. 3.The business continues when a shareholder dies. 4.As the company expands it can afford to employ more experts in each department.

7 R. Delaney 1.Profits have to be shared between all the shareholders. 2.It is more expensive to set up a limited company than a sole trader business. 3.There are many legal requirements that a limited company must honour. 4.The original founders or owners may lose control of the company if they end up with less than half of the issued share capital. Disadvantages of Limited Companies

8 R. Delaney Co-Operatives A co-operative (often called a co-op) is a business organisation set up by and run for the benefit of a group of people who share a common interest. Features 1. Each member must purchase at least one share. 2. Members receive interest on these shares. 3. Each member has only one vote. 4. Profits are divided in accordance with the value of transactions that the member has with the co-operative. 5. If the co-operative registers with the Registrar of Friendly Societies the members can have limited liability.

9 R. Delaney Forms of Co-operatives 1.Producers’ co-operatives 2.Workers’ co-operatives 3.Retail co-operatives 4.Service co-operatives

10 R. Delaney Advantages of Co-operatives Advantages 1.People can usually achieve more collectively than they can by acting individually. 2.Because of the manner in which profits are shared, members are encouraged to do as much business as possible with the co-operative. 3.All members have an equal say in the running of the business. 4.Co-operatives create local employment. 5.The members can have limited liability.

11 R. Delaney Disadvantages of Co-operatives Disadvantages 1.Co-operatives are usually too small to compete with larger public limited companies that have more capital. 2.Appointments to management positions are sometimes based on a person’s popularity rather than on that person’s ability. This can lead to poor organisation of the business.

12 R. Delaney State-Owned Companies State-owned companies are formed by an Act of the Dáil and owned by the State. The State finances the companies and appoints boards of directors to manage them, but does not get involved in their day-to-day running.

13 R. Delaney Reasons why there are State Companies 1.Some essential services cannot be provided by private enterprise at a reasonable price, e.g. public transport and electricity in remote rural areas. 2.Private enterprise may not have sufficient capital to set up the business. 3.The profitable ones are a source of income for the State. 4.The State can keep control over some natural resources, e.g. natural gas and peat.