3.2 Types of business organisation
- Created by: DCN18
- Created on: 26-10-18 21:27
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- 3.2 Types of business organisation
- Business ownership models
- Sole traders
- Small businesses with a small amount of capital.
- Run by one individual
- All profit belongs to the sole trader
- Unincorporated
- Partnerships
- Consist of between 2 ans 20 partners
- Partnerships are likely to have increased capital funds, compared to sole traders as there are more partners involved in the business.
- Cheap and easy to set up
- Unincorporated
- Private limited companies
- Many private limited companies are small family owned businesses
- No minimum requirement for issued share capital
- Shares are not traded publicly, but are transferable between individuals in the company
- Valuation of shares are difficult to calculate as they aren't sold on the stock market
- Incorporated
- Public limited liability compaines
- Issued share capital over £50000
- Two members and two directors
- A Public limited company can sell shares on the stock market but they dont have to
- Incorpooated
- Sole traders
- Benefits and risks
- Partnerships
- Increased capital
- Individual partners could specialize in different areas which could progress the business further
- Better cover for illness and holidays
- Disagreements among the partners
- sole traders
- All profits go to the owner
- Easy to establish legally
- The owner has unlimited liability for the debts of the business
- Should the owner become bankrupt their personal assets could be sold to pay trade payable
- Owner has to work long hours and wont have many holiday opportunites
- Partnerships
- Sources of finance for business
- owners capital
- Sole trader
- Mortgage
- Any business
- Bank loan
- Any business
- Bank overdraft
- Any business
- Partners capital
- Partnerships
- Ordinary shares
- Limited companies (public and private) only
- A one off payment in return for a stake in the business in question
- Dividends should to be paid to the shareholders but it is not essential
- Debentures
- Limited companies (public and private) only
- Debentures
- Limited companies (public and private) only
- Fixed interest, fixed repayment loan
- owners capital
- Business ownership models
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