1. BUSINESS OWNERSHIP

2. Sole Trader
Partnership
Franchise
TYPES OF OWNERSHIP
Private Limited
Company Ltd
Co-operative
Public Limited
Company (plc)
Public
Ownership

3. LIABILITY Limited Liability Unlimited Liability The owners are only
responsible for the debt
equal to the value of their
shares. (They will only lose
the amount they invested in
the business)
Unlimited Liability
The owners of the business
are responsible for any
debt. They may lose their
personal possessions to pay
any debts the business
might run up.

4. SOLE TRADER Business owned by one owner Also known as a proprietor
Can employ people but they will not be involved in control of business
Small businesses
Has unlimited liability

5. Examples of sole traders:
Small shops
Plumbers
Electricians
Cleaners

6. Advantages of setting up as a sole trader
Easy to set up – no complicated forms
Make decisions quickly – no agreement needed
Less capital needed
Taxed differently – National Insurance contributions are lower
All profits kept.
Can offer personal attention
Don’t have to make any information about the company public
They are their own boss.

7. Disadvantages of setting up as a sole trader
Unlimited liability
Difficult to raise money – seen as a risk
Don’t have economies of scale (buying in bulk)
No one to take over for ill-health or holidays

8. Activity:
List all the sole trader businesses that are in your area (Torfaen) ……

9. PARTNERSHIP Between 2 – 20 partners
Partners = joint owners of the business
May do decision making themselves or employ manager
Unlimited liability
Profits shared = to capital invested (unless stated otherwise in Deed of Partnership)
Eg. Doctor’s surgery may employ a practice manager to manager the day-to day running of the surgery.

10. Examples of partnership businesses:
Doctors
Dentists
Accountants
Solicitors

11. Partnership Act of 1890
Lays of rules if Deed of Partnership is not drawn up.

12. Setting up a partnership
Deed of Partnership. Should include:
Names of all the partners
Capital invested by each partner
How profits & losses will be shared
Duties of each partner
Procedures for adding new partners
Procedures for partners leaving partnership

13. Sleeping Partners
May want to invest in the business but not be involved in the running of it.
Can register with Registrar of Companies as a limited partner
Have limited liability
Must have one partner who has unlimited liability

14. Advantages of a Partnership
Easy to set up
Capital needed = small
Easier to raise extra capital
Profits go to partners = motivation
Smaller = good working relationships
No need to make public and information
Partners contribute with range of skills
Share problems and decisions

15. Disadvantages of a Partnership
Unlimited liability
Partners have disagreements;
Control of business
Sharing of profits
Withdrawal from the partnership
Inviting new partners into the business
If partner dies or becomes bankrupt = partnership is dissolved

16. Activity:
List all the partnership businesses that are in your area (Torfaen) ……

17. PRIVATE LIMITED COMPANY LTD
Made up of people who know each other.
Buy shares in the company = part owners
Shares cannot be bought by the public
Owners control who buys the shares
Minimum 2 people – no maximum
Expany by selling more shares = capital
Normally medium sized businesses

18. Requirements: Hold AGM (Annual General Meeting)
Independently audited copy of company accounts Registrar of Companies
Shareholders need permission to sell their shares

19. LIABILITY Limited liability
Company has its own legal identity, separate from the shareholders.
Shareholders run company themselves or appoint a manager

20. Examples of LTD businesses:
Eddie Stobart Ltd
Raleigh
Cineworld

21. Setting up a LTD company
Comply with the Companies Act
Register with Registrar of Companies
Documents required:
Memorandum of Association
Articles of Association

22. Memorandum or Association
Company’s name
Address of its registered office
States shareholders have limited liability
Amount of share capital to be raised
Purpose of the company (main activity)

23. Articles of Association
Names of directors and their role
How profits will be distributed
Internal rules for running the business – rules about meetings & voting rights of shareholders
Procedure to be followed at AGM

24. MEMORANDUM OF ASSOCIATION
ARTICLES OF ASSOCIATION SENT TO REGISTRAR OF COMPANIES
REGISTRAR ISSUES CERTIFICATE OF INCORPORATION

25. Advantages: Limited liability
Can raise extra capital by selling more shares – easier to expand
Can employ managers to run business if don’t want to do it themselves
Can continue trading if shareholder dies (unlike partnership)
Has its own legal status – separate from the shareholder
Can sue and be sued
Can own property

26. Disadvantages: Accounts of the company cannot be kept private
Audited each year
Copy sent to Registrar of Companies
Available for public to see
More difficult and expensive to set up - more administration
Cannot sell shares on stock exchange
Limited by Articles of Association As to type of business it can undertake

27. Activity:
List all the private limited company (LTD) businesses that are in your area (Torfaen) ……

28. PUBLIC LIMITED COMPANY PLC
Only 2 people needed to set up – no upper limit
People who can buy shares:
Public
Businesses
Financial institutions
Most shares in a plc owned by organisations rather than individuals
Shares bought the Stock Exchange
Share prices printed in national newspapers daily
Can expand by selling more shares
Limited liability
Company has its own legal status
Normally start as LTD then become PLC

29. Setting up a PLC More rules and regulations Similar to a LTD
Draw up a Memorandum of Association & Articles of Association – send to Registrar of Companies to apply for Certificate of Incorporation = company has registered.
Before COI is issued must raise £50,000
Must be approved by Stock Exchange Council
Once COI received the company issues a prospectus = advertisement inviting public to buy shares in the co.
Once shares issued the ROC will draw up Certificate of Trading.

30. MEMORANDUM OF ASSOCIATION
ARTICLES OF ASSOCIATION – SENT – REGISTRAR OF COMPANIES
REGISTRAR ISSUES CERTIFICATE OF INCORPORATION
COMPANY ISSUES PROSPECTUS
SHARES ARE ISSUED
ROC DRAWS UP CERTIFICATE OF TRADING
COMPANY BEGINS TRADING

31. Advantages: Limited Liability
Easy to raise capital – issue more shares
Banks more willing to lend money to a large well-established company – less risk
Easier to grow and expand
Shareholders will appoint specialists to manage and run the company for them

32. Disadvantages: Expensive
a lot administrative work (paper work)
Raise at least £50,000
Issue more information about itself – expensive to produce
Has to prepare Annual Accounts – printed and sent to all shareholders
Also make them available for general public and competitors to see.

33. Activity:
List all the public limited company (PLC) businesses that are in your area (Torfaen) ……

34. FRANCHISE
Where a small business owner buys the rights to sell the goods and services of a large, well-established company.
Franchisee = small business buying the rights.
Franchisor = large business selling the rights

35. Examples of types of businesses:
Body Shop
British School of Motoring (BSM)
KFC
McDonalds
Burger King

36. Setting up a Franchise
Franchisor sets out the rules for the running of the business - ensure quality and standards are maintained.
In return, the franchisor will:
Give a well-known name to the new business
Provide advice on running of business
Provide training to start the business
Organise the advertising campaigns
Supply the materials used fro the goods or services
Proved equipment, eg; shop fittings so that all look the same and same standards

37. Small business has to pay for the privilege of a stake in the large owner’s business.
It has to pay:
Start-up fee – for licence from franchisor to run business
Royalty – in form of a percentage of annual profits to the franchisor

38. Advantages:
The franchisor chooses the franchisees carefully – knows what characteristic that make a successful franchisee
The franchisor decides how much money the franchisee must invest in the business
The franchisor provides support – management advice & training – help franchisee solve problems.
Most small businesses fail because the owners do not realise the amount of capital needed to start up and run a business

39. Disadvantages:
Franchisee’s do not have freedom of running their own business;
Bound by rules e.g. Can’t vary product or price
Franchisee cannot sell the business without franchisors permission
Franchisor can end franchise without consulting franchisee
Franchisee pays percentage of profits in royalties
Franchisee will never own the business outright
Franchisee may not receive compensation for the loss of business if franchisor ends business

40. Activity:
List all the Franchise businesses that are in your area (Torfaen) ……

41. CO-OPERATIVES
Worker co-operatives are businesses owned by all the workers in the business.
Each worker has shares based on how much he or she has invested in the business
All workers are involved in making the decisions
Each worker has one vote
Votes are not related to number of shares they own
Unless it is a limited company = one vote per share
All share in the profits
All must contribute to the running of the business
No limit to the number of members

42. Types of businesses
Fruit growers
Play groups

43. Advantages: Fewer disagreements because workers are the owners
All have interest in making business successful, improving morale and productivity
Increases in profits are share equally among all the workers

44. Disadvantages: New workers have to buy shares and become part owners
New employees may find it difficult to raise money to buy shares when they first start work
Successful worker co-operatives are often pressured to sell the business – lose all the freedoms they have
To expand – find new workers willing to invest in business
All workers are paid the same. In other businesses the managers are paid more.
Difficult to recruit best managers due to pay limitations
If business doesn’t need more staff they will find it difficult to expand

45. Activity:
List all the co-operative businesses that are in your area (Torfaen) ……

46. PUBLIC OWNERSHIP
Some enterprises in the UK are owned or controlled by the state such as government departments and organisations funded by the government.
They include:
Government departments
Local authorities
Health trusts
Public corporations
Charities and voluntary organisations

47. Government departments
Deals with different matters at national level. These include:
NHS
Social security benefits
Defence
Police
Prison service
Environmental issues and concerns
Major road building programmes
Collection of taxes

48. Local Authorities
Provide services for the local community. These vary, depending upon the area, so that the services in a rural community are different from those offered in a city.

49. The range of services offered:

50. Health Trusts
Receive money from the government to deliver health care without making a profit

51. Public Corporations
Are government owned businesses, such as the BBC and the Royal Mail service. These businesses are expected to operate profitably, just like private organisations.

52. Charities and voluntary organisations
Many staff are work voluntarily (don’t get paid)
Also called not-for-profit organisations because they focus on using their income to provide a service to those in need.

53. How charities raise their money

54. Activity:
List all the public sector businesses that are in your area (Torfaen) ……