Types of Ownership- Business Studies AS Unit 1

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  • Created by: Bendean3
  • Created on: 26-04-15 14:09

Sole Trader

- Owned by one person but can employ many.

Advantages

  • They keep all the profits
  • Make all the decisions
  • They are their own boss

Disadvantages

  • May have to work very long hours
  • can be difficult to take time off
  • have unlimited liability which means that they would lose all personal assets as well as what was invested in the business if they go bankrupt and it is necessary.
  • It can also be difficult to raise finance- but can be raised through bank loans etc.
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Partnership

- This is a business owned by 2-20 people, such as lawyers/dentists/accountants.

Advantages

  • There is more people paying money into the business which creates less risk.
  • They share decisions- therefore more input in major decisions
  • Wise to get a solicitor involved and get a partnership agreements

Disadvantages

  • Unlimited liabilty of partners- depends entirely on what the owners sign because they do have access to limited liabilty.
  • Share decisions- this could also be a disadvantage because agreements may be hard to reach as everyone could have completely different ideas.
  • The partnership may not be able to agree on everything
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Private Limited Company (LTD)

- These are companies that are often owned by a group of family and friends.

Advantages

  • Limited liabililty- where the company can only lose what it has invested.
  • Shareholders get a divident paid every year.
  • Shares are bought and sold by family and friends only and with the consent of the other shareholders.
  • Company is run by a board of directors.

Disadvantages

  • Annual reports need to be published each year and are very time consuming.
  • There is a lot of paperwork and agreements to be made to achieve the LTD title.
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Public limited company (PLC)

- these are large companies that are listed on the Stock exchange.

Advantages

  • They have many share holders all across the world- often other businesses.
  • They have limited liability and can therefore only lose what they invest.
  • It is easy to raise finance because they are often a popular/well known company that attract a lot of interest from potential investors.
  • Managed again by a board of directors.

Disadvantages

  • They again have to publish annual reports and accounts each year, that anyone can see- so if the company does bad one year, they will lose investment interest and their reputation can potentially decrease.
  • There is a lot of paperwork.

PLC's are often a very favorable type of ownership.

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Franchise

- A large company that sells it's brand to people so they can start up as a known company. 

- Where a franchisee pays a large company to use their name andn brand.

Advantages

  • They are more likely to succeed given they choose a suitable/popular location - this is because it is already a recognised business therefore Franchisee's won't have to build a reputation for the company.
  • Everything gets supplied for them by the company as it has to be their menu, uniform, logo, design etc.
  • The franchisor will often pay for the marketing for the Franchisee.

Disadvantages

  • They can't make their own decisions or rules because it is not their business
  • The franchisee has to pay some of their profits to the Franchisor.

E.g. McDonalds, Dominoes, Specsavers.

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Franchise

- A large company that sells it's brand to people so they can start up as a known company. 

- Where a franchisee pays a large company to use their name andn brand.

Advantages

  • They are more likely to succeed given they choose a suitable/popular location - this is because it is already a recognised business therefore Franchisee's won't have to build a reputation for the company.
  • Everything gets supplied for them by the company as it has to be their menu, uniform, logo, design etc.
  • The franchisor will often pay for the marketing for the Franchisee.

Disadvantages

  • They can't make their own decisions or rules because it is not their business
  • The franchisee has to pay some of their profits to the Franchisor.

E.g. McDonalds, Dominoes, Specsavers.

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