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
    • 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
    • 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

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