Chapter 18 Ownership structures © Edco 2012 It’s the Business

Ownership structures When starting a new business entrepreneurs will need to decide on the most suitable legal and ownership structure. Types of ownership structures: Sole Trader Partnership Limited Company Co-operative State Ownership © Edco 2012 It’s the Business

o Factors effecting the choice of legal structure Owner’s liability Access to capital Level of control Taxation implications Legal complexity and set-up costs Scope for expansion Continuity of existence © Edco 2012 It’s the Business

Sole trader A business owned by one person Advantages: Easy to set up Owner keeps all the profit Privacy Disadvantages: Unlimited liability Lack of capital May lack business skills © Edco 2012 It’s the Business

Partnership A business ownership model that allows for between two and 20 owners Advantages More capital Extra skills and shared workload Less risk Disadvantages Profit shared Less control Unlimited liability © Edco 2012 It’s the Business

Private Limited Company A form of business ownership that allows for a maximum of 99 owners called shareholders Advantages Members’ liability is limited Separate legal identity Continuity Additional capital Disadvantages Set-up procedures and costs Profits shared Disclosure © Edco 2012 It’s the Business

Company formation procedure The following forms must be sent to the Companies Registration Office (CRO): Form A1 Memorandum of Association Articles of Association If everything is in order the CRO will issue the new company with A Certificate of Incorporation. © Edco 2012 It’s the Business

Public Limited Company The names of all public limited companies end with the letters PLC. They must have a minimum of seven shareholders and the authorised share capital determines the upper limit on the number of shares available. © Edco 2012 It’s the Business

Public Limited Company Advantages Access to capital markets Positive image World-class management Disadvantages Heavily regulated Disclosure of information Takeover target © Edco 2012 It’s the Business

Co-operatives A co-op involves a group of people working together to achieve shared goals. Types of co-ops: Producer co-ops Worker co-ops Community co-ops Financial co-ops © Edco 2012 It’s the Business

Key features of co-ops Members usually have a common bond and operate the business for their mutual benefit Members have limited liability Operate on principal of ‘one person, one vote’ Profits are shared Registered with Registrar of Friendly Societies © Edco 2012 It’s the Business

State ownership These are not government departments, but are companies set up, owned and financed by the State. They tend to operate in areas of key social importance. E.g. CIE, ESB, IDA, RTE and An Post. Some state companies operate on a commercial basis, while others are non-commercial organisations. © Edco 2012 It’s the Business

Reasons for changing ownership structure Improved access to capital Additional expertise Less risk/Limited liability Continuity of existence Privatisation/Nationalisation © Edco 2012 It’s the Business