Business Ownership

A sole trader is a business that is owned by one person. It may have one or more employees. 

ADVANTAGES

• Total control of the business by the owner.
• Cheap and easy to start up-Few forms to fill in and to start trading the sole trader does not need to employ any specialist services, other than setting up a bank account and informing the tax offices.
• Keep all the profit- As the owner, all the profit belongs to the sole trader.
• Business affairs are private-Competitors cannot see what you are earning, so will know less about how the business works and how it succeeds.

DISADVANTAGES

• Unlimited liability 
• Can be difficult to raise finance, because they are small, banks will not lend them large sums and they will not be able to use any other form of long-term finance unless they change their ownership status.
• Can be difficult to enjoy economies of scale, i.e. lower costs per unit due to higher levels of production. 
• There is a problem of continuity if the sole trader retires or dies.

Partnerships are businesses owned by two or more people. Doctors, dentists and solicitors are typical examples of professionals who may go into partnership together and can benefit from shared expertise.

ADVANTAGES

• One advantage of partnership is that there is someone to consult on business decisions.

DISADVANTAGES

• The main disadvantage of a partnership comes from shared responsibility. Disputes can arise over decisions that have to be made, or about the effort one partner is putting into the firm compared with another. 
• Like a sole trader, partners (who have not registered as an LLP) have unlimited liabilty
  

A private limited company (ltd) is often a small business such as an independent retailer in a market town. Shares do not trade on the stock exchange.

ADVANTAGES

• Limited Liability-The obvious advantage of a Limited Liability Company is the financial security that comes with business.
• Separate Entity-A limited company is considered to be a separate legal entity from its owners.If they retire or die, the company will continue to exist and operate. This ensures security for employees and other members.
• Taxation and Tax Advantages-Limited Companies are only taxed on their profits (usually at a rate of 21%) and as such are not subject to the higher (personal) tax rates placed on sole traders or partnerships which can reach 40%. 
• Ownership and Control-In the case of Private Limited Companies, the Directors are also usually the main shareholders of the Company. 

DISADVANTAGES

• Restricted Capital Raising-There is a restriction on the raising of capital via sale of shares
• Dilution of Powers-Sometimes disputes will arise between Directors and Shareholders as their ideas of what is best for the company vary.

A public limited company (Plc) is a company that is able to offer its shares to the public. They don't have to offer those shares to the public, but they can.

ADVANTAGES

• Better access to capital- i.e. raising share capital from existing and new investors
• Liquidity-Shareholders are able to buy and sell their shares (if they are quoted on a stock exchange
• Value of shares-The value of the firm is shown by the market capitalisation (based on the share price)
• The opportunity to more easily make acquisitions-e.g. by offering shares to the shareholders of the target firm
• To give a company a more prestigious profile

DISADVANTAGES

• Once listed on a stock exchange, the company is likely to have a much larger number of external shareholders, to whom company directors will be accountable
• Financial markets will govern the value of the company through the trading of the company's shares, and will represent the market's view of the company's performance over time
• Greater public scrutiny of the company's financial performance and actions

Franchising arises when a franchisor grants a licence (franchise) to another business (franchisee) to allow it trade using the brand / business format. The franchisor is the business whose sells the right to another business to operate a franchise-they may run a number of their own businesses, but also may want to let others run the business in other parts of the country.

ADVANTAGES

• The franchisee is given support by the franchisor. This includes marketing and staff training.
• The franchisee may benefit from national advertising and being part of a well-known organisation with an established name, format and product
• Less investment is required at the start-up stage since the franchise business idea has already been developed
• A franchise allows people to start and run their own business with less risk. The chance of failure among new franchises is lower as their product is a proven success and has a secure place in the market

DISADVANTAGES

• Cost to buy franchise – can be very expensive (hundreds of thousands of pounds).
• Have to pay a percentage of your revenue to the business you have bought the franchiser from.
• Have to follow the franchise model, so less flexible. You would probably be told what prices to set, what advertising to use and what type of staff to employ.