1. Business Ownership
BTEC Business

2. Investing in a Business
Sole traders must raise all the finance to set up and run the business themselves
Partners can all contribute to the financing of a firm
Private limited companies can sell shares to family, friends and associates
Public limited companies can raise finance by selling shares on the stock market

3. Limited Liability – What does it mean?
It all comes down to the responsibility for the debts of the business:
A sole trader or partnership can be held responsible for all the debts of the firm
The owners of limited companies can only be held responsible up to the value of their investment in the business

4. Other Sources of Finance
Loans
Overdrafts
Profits that are fed back into the business
Shares
Grants and donations

5. Ownership and Control
Owners often want to keep control of their businesses
This leads many small firms to stay as sole traders, even though this limits their funds
Taking on new partners or shareholders cuts the amount of control that owners have
If you hold the majority of shares (over 50%) you can keep some control, but not all

6. Legal Responsibility
Sole traders have no legal formalities to go through, apart from registering for VAT if their turnover reaches a certain amount
Partnerships also have no legal formalities but may choose to sign a Deed of Partnership
Companies have to go through a series of legal formalities

7. Forming a Limited Company
Limited companies must produce two documents
Memorandum of Association and Articles of Association
If these are acceptable, the Registrar of Companies awards a Certificate of Incorporation
The company can then trade

8. Other Legal Requirements
A limited company must also send a copy of its annual accounts to the Registrar
It must also hold an Annual General Meeting and invite its shareholders to attend
Becoming a Public Limited Company involves far more time and cost
It must have a minimum of £50,000 share capital

9. Where the Profits go
Limited companies use part of their profits to pay a dividend to shareholders
They can choose not to pay a dividend but always have to pay interest on any borrowing the company has made
Profits can be ‘retained’ and ploughed back into the company

10. Profits and Losses
Any profits made (once tax has been paid) can be kept by the owners of the business
This makes Sole Trader (and partnership) businesses very attractive
But remember … whatever funds have been put into the business will be lost if it goes bust!