Level 1 Business Studies 1.1 - AS90837 Demonstrate an understanding of internal factors of a small business

Types of Business sole trader, partnership, registered company Students will identify and describe different types of legal entities: Define and recognise the legal entities of business ownership i.e. sole trader, partnership and registered company Explain reasons for different forms of legal entities Explain advantages and disadvantages of each type of entity

Sole Trader A business owned and operated byone person Eg: Hairdresser, plumber, café, dairy

Sole Trader Reasons Relatively easy to establish Few legal requirements or restrictions to set up Can employ people with the required skills

Sole Trader Advantages Can be your own boss Few legal requirements to set up Able to organise and run the business as you wish Control over employees Can choose how long and when to work

Sole Trader Disdvantages Unlimited liability – sole traders are not a separate entity Sources of finance are often limited which can make expansion difficult Often need to take advice from outside the business

Partnership Two or more individuals trading together Owned and operated by 2 – 20 people Eg: Lawyers, accountants, doctors, architects

Partnership Reasons Business run by the owners Partners contribute capital to set up and run the business All partners are able to contribute to the running and organisation of the business Partners share the profits

Partnerships Advantages Partnership Agreement clearly creates a business agreement between the partners Increased levels of capital Shared responsibility Increased knowledge and specialism Partners motivated due to sharing of profits

Partnership Disdvantages Unlimited Liability If business fails, partners will be forced to contribute their personal resources Partners can disagree on important decisions. It can be time consuming to reach a consensus. Partners can suffer if one partner is inefficient or dishonest

Private Limited Company: Companies are jointly owned by people with an interest in and have invested in the business NB: for level 1 Business Studies companies will tend to be private

Private Limited Company Reasons Owned by numerous people - shareholders Companies are separate legal entities from their owners Ability to grow and expand A company can make contracts or legal agreements

Private Limited Company Advantages All shareholders have limited liability – personal assets owned by the shareholders are NOT sold off to pay for company debts A large number of people can purchase the shares Additional shares can be issued in order to raise capital and expand the company

Private Limited Company Disdvantages Legal issues when being established Cannot sell shares to public Public is able to view accounts Difficult to transfer shares, all shareholders have to agree