3.1.2 Business Ownership

Sole Trader

  • Owned and managed by one person
  • Can employ other staff

Advantages:

  • Quick and easy to set up
  • Owner can make decisions themselves, so decision-making is faster
  • All profits are kept by owner
  • They can be their own boss

Disadvantages:

  • Sole traders have to manage all parts of the business
  • Unlimited liability
  • Business dies with the owner
  • May be difficult to source capital
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Partnership

  • Under the 1890 Partnership Act, a partnership is created when two or more people set up in business together for a common purpose, such as profit.
  • Usually allowed to a maximum of 20 partners

Advantages:

  • More funds are available as there are more people
  • New partners may bring new skills
  • Can cover for each other (eg when one goes on holiday, the other partner(s) can operate the business)

Disadvantages:

  • Unlimited liability
  • Disagreement/conflict could occur between different partners
  • Profits are shared
  • One partner is liable for the actions of other partners
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Private Limited Company (ltd)

  • Owned by shareholders
  • Sells shares privately
  • Can be restrictions on who shares are sold to (more control)

Advantages:

  • To customers, a company has more status than a sole trader
  • Limited liability
  • Business still exist after the owner dies
  • Managers can be employed to run the buisness while owners retain control

Disadvantages:

  • Various legal procedures need to be completed, cositng time and money
  • A summary of the buisness' accounts must be made available to the general public, including competitors
  • Accountants must be checked by an auditor
  • The business must pay corporation tax
  • Any additional shareholders become inportant stakeholders. They may have different views and objectives and they may not work well with the entrepeneur.
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Public Limited Companies (plc)

  • Shares are floated on the stock exchange
  • Anybody can buy shares
  • Share prices change according to demand

Advantages:

  • Has access to a greater number of investors
  • Attracts cheap publicity
  • Usually have more status than an ltd and are often bigger
  • Relatively easy for shareholders to sell shares so therefore shareholders are more likely to buy shares

Diadvantages:

  • More media coverage can be bad if the business does something wrong
  • A plc cannot control who buys its shares
  • More regulated; has to do more things according to the law
  • New shareholders may have opposing views
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Not-for-profit Organisations

  • Mainly charities
  • Set up to achieve objectivews other than profit
  • Will srill have to rasie funds and invest just like other companies

Advantages:

  • Good ethical image to customers
  • Helps other people

Disadvantages:

  • Can be vulnerable to media 'scandals' and probes
  • Can be hard to raise finds if the organisation is obscure
  • Doesn't generate any profit for the owners/shareholders
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