Different Types Of Business You need to understand: How sole traders and partnerships are owned, managed and financed. The differences between private and public limited companies. The main features of co-operatives and franchises. How public sector companies differ from the private sector.
Sole Traders And Partnerships Sole traders (sole proprietors) and partnerships are the smallest forms of business but are the easiest to set up. A sole trader is a business owned and controlled by one person. Sole traders operate under their own name.
Sole Traders And Partnerships Partnerships are owned by the partners (there must be a minimum of two and usually a maximum of 20 partners). Most partnerships write a Deed of Partnership – a set of rules to follow if trust between partners breaks down. A Deed usually covers the sharing of profits and losses and the financial contribution of each partner.
Sole Traders And Partnerships Have unlimited liability, which means the owners are personally responsible for all the debts of the business. Finance comes from own resources, bank loans or government grants, where available. Sole Traders And Partnerships Do not have to make their business dealings public.
Advantages and Disadvantages Sole Trader Makes all the decisions, keeps all the profits, has total control, small start up costs, can keep the business flexible, lots of job satisfaction. Unlimited liability, can lose personal wealth if business fails, lack of capital so can’t bulk buy, do market research, pressure of responsibility. Partnership Easy to set up, lots of expertise available than to the trader, shared responsibilities mean less pressure. Liability still rests with partners, each partner is responsible for debts of others, disagreements possible.
PLC And LTD Plc A public limited company is usually a much larger company. It sells shares to the general public through the Stock Exchange in London. The original owners often lose control over decision-making. The interests of shareholders and managers may be different. AGM and annual report are important in keeping everyone informed and involved. Plc’s find it easier to raise additional finance to help fund further developments in the business. Banks and financial institutions are willing to buy shares and lend money more readily than they would to a Ltd.
PLC And LTD Ltd It sells shares privately to family or friends. A Private Limited Company is usually a small to medium-sized business. It sells shares privately to family or friends. The original owners, as the board of directors, keep control. Managers are usually appointed to run the day-to-day business. Private limited companies find it comparatively hard to raise finance from banks for expansion.
PLC And LTD Ltd’s and Plc’s Annual General Meeting (AGM) – report for shareholders. Accounts must be audited and published. Ltd’s and Plc’s Limited liability means no-one is personally liable for company debts. Finance comes from sale of shares, bank loans, government grants where available.
The Main Differences LTD PLC Shares sold only to founders Shares listed on Stock Exchange, sold to public 1 shareholder, 1 director, 1 secretary 2 shareholders, 2 directors, Company Secretary Takes time to sell shares Minimum share capital £50’000 Owners retain control Original owners may lose control Loans more difficult High status, good credit rating Shareholders likely to agree May be disagreement
Franchises Advantages to Franchiser Advantages to Franchisee Business grows without risk Less risk during start-up Regular income Keep most of the profits Less organisation and staff Selling established product Keep control Using successful brand image Help and training available There is national marketing
Private and Public Sectors Big organisations are important to the government for a variety of different reasons: Security Reasons Economic Reasons Financial Reasons Social Reasons
Private Sector Organisations Public Limited Companies Incorporated Private Limited Companies Private Sector Business Partnership Unincorporated Private Sector Business
Public Sector Organisations Local Services Administrative Departments Local Government Local Authorities Public Sector Business Government Agencies Public Corporations Central Government Public Service Organisations Government Departments
Privatisation Private Businesses Ordinary People From 1979 companies began to be privatised by selling shares to: Private Businesses Ordinary People
Some Reasons For Privatisation Control in private hands. More people can be share owners. More competition encourages efficiency. Reduces the need for government subsidies. Private sector is better and quicker at making decisions.
Some Reasons Against Privatisation Many of these industries are monopolies and can change high prices or cut services. Private industry is not interested in providing non- profitable services that bring social benefits. Private industry may not afford key investment. Competition can be wasteful as resources are duplicated. Profits go to the wealthy who can afford shares. There may be a risk of job losses.