GCSE Business Studies - Business Ownership

Sole trader businesses just have one owner. Most small businesses are sole traders. Examples of sole traders are plumbers, hairdressers, newsagents, fishmongers. 

Sole Trader - Advantages

• Easy to set up
• Be your own boss
• You decide what happen's to the profit, alone.

Sole Trader - Disadvantages

• Work long hours and not get many holidays
  
• Unincorporated, so if someone sues the business, they're suing you personally
• Legally responsible for all the business debts
• Hard to raise finance, banks see sole trader's as risky

Partnerships are more usually formed in accountancy firms, solicitors and doctors firms. Partnerships can have between two and twenty partners. Each partner has equal say in the business and equal share of profit in business - unless they have a deed of partnership that they've got to follow.

Partnership - Advantages

• More owners means more ideas
• Less work to do, sharing between partners
• More capital can be put into the business, more likely to be accepted for a loan.

Partnership - Disadvantages

• Each legally responsible for all partners
• Have unlimited liability, like sole traders
• Disagreements can appear more oftern because your not the only owner.
• Profit is shared between partners.

There is two types of limited companies - private and public. Both have some important differences compared to sole traders and partnerships. A limited company is incorporated - it has separate identity to the business in the eyes of the law. The owners only risk loosing the money they've invested. It's owned by shareholders, the more shares you get the more you own.

Public limited company can be from one member to seven members. They can sell shares to the public and on the stock market. They are seperate identities to the owners, meaning the owner only looses it's investment. It's easier to raise finance from capitalists and can get angel investors involved in the business. They have to publish financial records every year and is more expensive to start up with costs of legal paperwork.

Private limited companies can only sell shares if all the shareholders agree. The shareholders for private limited can only be the businesses family and friends. They have Ltd. at the end of their names to show private limited company. 

Ltd - Advantages

• Can only loose money invested into the business
• Easier to get a loan or a mortage for a Ltd than a sole trader and a partnership

Ltd - Disadvantages

• More expensive to set up because of legal work involved
• Has to publish accounts and finance records every year
• Can't sell shares on the stock market