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Business Ownership
The Private Sector
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Business Ownership
Sole Trader:
Owned, financed and controlled by one
individual but can employ other staff
Common in local building firms, small
shops, restaurants, butchers, etc.
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Business Ownership
Sole Traders: Advantages
Easy to set up Personal incentive
keep all the profits make key decisions
high degree of control Flexibility Ability to offer personal service
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Business Ownership
Sole Traders: Disadvantages
Unlimited Liability Limited access to capital Potential for long hours Pressure of being solely responsible Lack of continuity business ceases
once owner dies
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Business Ownership
Partnerships:
Owned, financed and controlled by upwards
of 2 partners Terms of Partnership agreed through contract
Bound by the terms of the Partnership Act 1890
Common in professions lawyers, accountants,architects, surveyors, estate agents, vets, etc.
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Business Ownership
Partnerships: Advantages
Greater access to capital Shared responsibility Greater opportunity for specialisation Easy to set up
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Business Ownership
Partnerships: Disadvantages
Unlimited Liability(However since 2001, Partnerships can apply to be Limited Partnerships)
All partners liable for the debts of the others Partnership dissolved on death of one partner Potential for conflict Decisions of one partner binding on the rest
Limited access to capital
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Business Ownership
Limited Companies: Private Limited Company (Ltd) Owned by between
1 and 50 shareholders
PublicL
imited Company (PL
C) Owned by minimumof 2 but no maximum number of shareholders
Has a separate legal identity the company can sueand be sued
More complex to set up
Minimum share capital of 50,000
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Business Ownership
Limited Companies:Must Register with Registrar of Companies at Companies House
Memorandum of Association
Details of the nature, purpose and structure of the company Articles of Association
Details of the internal rules of the company
Certificate of Incorporation allows the company to trade Shareholders have limited liability can only lose what
they agreed to put into the company no personal liability PLCs shares traded on Stock Exchange LTDs shares only bought and sold with agreement ofexisting shareholders
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Business Ownership
Limited Companies Issues
Divorce between ownership and control
Potential for diseconomies of scale communication, decision making, etc. Must publish accounts PLCs shareholders may be large institutions
pension funds, insurance companies, etc.
PLCs - Share value subject to volatility affects company value
PLCs can be large, complex, possess marketpower
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Business Ownership
Co-operatives:Ownership, finance and control in hands of members
Exists for the benefit of membersConsumer co-ops members buy goods in bulk,sell to members, divide profits between members
Worker co-operatives workers buy thebusiness and run it decisions and profits shared
by membersProducer co-operatives producers organisedistribution and sale of products themselves
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Business Ownership
Franchises:Method of business ownership backed by established brand name
Owner gets to run a business with less risk
Owner buys the right to use the established companys name,format products, logos, display units, methods, etc.
Speedy way for business to expand Become very popularOwner (Franchisee) responsible for debts, pays a royalty to
owners of the brand, keeps any remaining profit Franchisee pays a fee for the purchase of the franchise Common franchises Body Shop, McDonalds, Costa Coffee,
Subway