By the end of the lesson you should: Know what types of business there are in the UK Be able to explain on what Unincorporated & Corporated businesses are Be able to explain the characteristics of each form of business

UK business ownership This means: Most businesses in the UK are privately owned. This means: They are owned by private individuals These individuals risk their own money The owners’ reward is the profit they make. The concept of risk is important as this defines an entrepreneur. Obviously the more a person invests, the greater the risk of loss. It is also useful to emphasis that although owners can keep the profit (or share it between them) they must first pay tax to the Inland Revenue!

Private Limited Company Public Limited Company Types of Organisation Public Sector Private Sector National Government Local Government Sole Trader Partnership Private Limited Company (LTD) Public Limited Company (PLC) Franchise

Private ownership options Sole trader – 1 owner Partnership – 2 people or more Private limited companies – often a family-run business with 2 or more owners. The shares of the firm cannot be sold on the Stock Exchange. Public limited companies – a business with 2 or more owners (usually 1000s) whose shares are bought and sold on the Stock Exchange Franchises – small business trading with agreement of large firm for a fee Each option can be discussed in more detail and it is useful if students are asked for examples in their own area. Students should be clear that a sole trader can employ staff, eg the owner of a hairdressing business can employ assistants – but there is still just one owner. Even if a worker cooperative cannot be identified, the Coop retail organisation should be known to most students.

Liability Sole traders and partnerships have unlimited liability. Owners are responsible for all debts and may have to sell personal possessions. Companies (ltd & plc) have limited liability. Owners can only lose their investment even if the company has huge debts. It is useful to state that sole traders and partnerships can go bankrupt, but companies go into liquidation. A specific example is also useful, for instance, a shareholder in a large plc valued at £50 million may lose a £4,000 investment in shares but a sole trader could lose his house, savings and other personal possessions if the business owned a large amount of money. Students should therefore note that for risky activities, and/or where the stock is expensive the owner(s) may be better with a limited company.

Sole Trader – characteristics A sole trader is self-employed Must register business with Inland Revenue The Sole trader can employ people to work for them. Responsible for keeping accurate business accounts & completing annual self assessment form In law, the business and the sole trader are seen as the same thing (unincorporated). You can sue the owner! If the owner dies – the business ceases to exist Money for expansion often comes from ploughing profits back in (this reduces the money the owner receives)

Partnership – Characteristics Between 2 and 20 partners Owned, controlled & managed by partners Finances from personal savings / borrowed from bank Again, a partnership is unincorporated. You can sue the partners Partners don’t have to have an equal share Need to draw up a Deed of Partnership – legally binding agreement

Private Limited Company (Ltd) – Characteristics Owned by shareholders (family or friends) Run by the Board of Directors – elected by shareholders Must hold an Annual General meeting (AGM) Incorporated – company has a separate legal identity from its owners Limited Liability

Public Limited Company (Plc) – Characteristics Owned by shareholders (anyone over 18) Shares sold on Stock Exchange Must have sold more than £50,000 of shares Share prices rise and fall Run by the Board of Directors – elected by shareholders Must hold an Annual General meeting (AGM) Incorporated – company has a separate legal identity from its owners Limited Liability

Activity: Collect am envelope and go to the corner of the room relating to the card in your envelope. Complete the task in your corner. Whole team put your hand up once you've finished.

Things to think about: Which team won? Why did they complete the task so quickly? What problems did your groups have? Which team produced the most? How should you share the profit your business made?

Task: Write down the characteristics of the firm that you are in on your sheet Move clockwise to the next firm and write down their characteristics and the next 2

Private Limited Company (Ltd) Public Limited Company (Plc) Sole Trader Partnership Private Limited Company (Ltd) Public Limited Company (Plc) No. of owners Liability Usual amount produced: rank 1-4 How are profits distributed? Characteristics

Private Limited Company (Ltd) Public Limited Company (Plc) Characteristics Continued Sole Trader Partnership Private Limited Company (Ltd) Public Limited Company (Plc)

Private Limited Company (Ltd) Public Limited Company (Plc) Sole Trader Private Limited Company (Ltd) Public Limited Company (Plc) Partnership