Business Ownership

Overview of the different types of business ownerships, advantages and disadvantages for AS business students, also useful for A2 as reminders.

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  • Created by: Lilly
  • Created on: 11-05-10 17:13

Sole Trader

Sole Trader

Owned by one person- may employ several people

Advantages

  • no complicated paper work to set up
  • decisions can be made quickly
  • close contact kept with customers/employees
  • all profits kept

Disadvantages

  • decisions made on your own
  • working long hours
  • provide all finance yourself
  • unlimited liability

- Sole trader could be held personally liable or all debts- could lead to selling personal assets.

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Partnership

Partnership

Between 2-20 partners - however there are exceptions for large firms

Advantages

  • the sharing of skills and workload
  • may be easier to raise capital needed
  • finances of costs needed can be split between partners

Disadvantages

  • conflict between partners
  • organising deeds of partnerships
  • unlimited liability
  • partnerships can rarely borrow or raise large sums of capital
  • business decisions may be harder/slower to make
  • profits shared


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Private Limited Company

Private Limited Comany

Must have at least two+ shareholders (no maximum). Shares cannot be traded on stock market

Advantages

  • possible to raise money through selling shares
  • limited liability
  • capital easier to raise - loans available from banks
  • registers the name/business - prevents anyone else using the same name

Disadvantages

  • have to share profits with shareholders
  • cannot make decisions quickly
  • extensive paperwork to set up
  • cost more to set up
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Public Limited Company

Public Limited Company

Shares bought and sold on the Stock Exchange

Advantages

  • large amounts of capital can be raised very quickly
  • greater borrowing power
  • limited liability
  • board of directors with expertise can be appointed
  • shareholders can sell/transfer their shares freely

Disadvantages

  • loss of overall ownership
  • loss of control
  • decisions take longer to make
  • profits are shared among large range of shareholders
  • published accounts have to be prepared
  • a lot of paper work
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Co-operatives

Co-operatives

People join to together to make the decisions, work and share profits

Advantages

  • generally more stable
  • caring employees- because everyone is getting a share of the profits
  • build good relationship with community and employees
  • savings in management expenses

Disadvantages

  • often find it difficult to raise capital
  • often a lack of sales promotion
  • possibility of conflict between members
  • longer decision making process
  • extensive record keeping necessary
  • participation of members is required for success
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Franchise

Franchise

Taking on the name of an established business but the owner of business is the store manager.

Avantages

  • business is based on a "proven idea"- it is established already= low risk
  • receive support and advise from franchisors/branded business
  • relationships with buyers/customers has already been established

Disadvantages

  • costs can be high depending on the business
  • franchise agreement can normally include restrictions on how to run the business
  • other franchisees may give the brand a bad name
  • profits are shared with franchisor
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Comments

Nadine

unlimited liability - the business takes control and the business can become corrupt and owns dept

Ishi

quality, 5 stars:)

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