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BUSINESS LEGAL FORMS OF Quit Legal forms of business SOLE TRADER PRIVATE LIMITED COMPANY PARTNERSHIP FRANCHISE PUBLIC LIMITED COMPANY Tonis.

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Presentation on theme: "BUSINESS LEGAL FORMS OF Quit Legal forms of business SOLE TRADER PRIVATE LIMITED COMPANY PARTNERSHIP FRANCHISE PUBLIC LIMITED COMPANY Tonis."— Presentation transcript:

1

2 BUSINESS LEGAL FORMS OF

3 Quit Legal forms of business SOLE TRADER PRIVATE LIMITED COMPANY PARTNERSHIP FRANCHISE PUBLIC LIMITED COMPANY Tonis

4 DEFINITION: A business owned and operated by one person, although they can employ staff Toni Morelli has decided to start a new business, which is an Italian restaurant. As he is the only owner, this makes him a SOLE TRADER. After a few months he has realised that there are advantages and disadvantages to being a sole trader which you can find out about by clicking on the red arrow SOLE TRADER

5 The ADVANTAGES are: There are few legal regulations when setting up the business The owner (Toni) has complete control over the business The owner has close contact with customers Incentives to work hard i.e. he keeps all the profits The owner can choose his holidays, pay, breaks etc.

6 SOLE TRADER DISADVANTAGES The DISADVANTAGES are: No one to discuss business matters with UNLIMITED LIABILITY The business has UNLIMITED LIABILITY CAPITAL Hard to raise finance as there are no other owners to put CAPITAL into the business The business is likely to remain small There will be a lack of specialist skills due to the businesses size Lack of continuity in event of death, sickness and holidays

7 SOLE TRADER If youve written down all the notes here are some challenges to test your knowledge. Click here for multiple choice questions Click here for essay questions and other tasks

8 TRUE FALSETRUE 1. A sole trader can raise finance easily 2. Sole traders have limited liability 3. The owner will have to share profits 4. This type of business is easy to set up 5. The business will grow quickly 6. There will be a lack of specialist skills 7. Sole traders can choose their holidays 8. There are a lot of legal regulations in setting up the business TRUE OR FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE TRUE TRUE TRUE TRUE TRUE FALSE

9 D B C A What is a sole trader? What is a sole trader? A person who sell soles An individual who co-owns a business with employees An individual who owns a business with and can have employees A person who owns a shoe company Questions 50:50 50:50 InternetAsk the class Lifelines

10 D B C A What advantage is there being a sole trader? What advantage is there being a sole trader? The owner can choose his own holidays, breaks Profits are shared Money is easy to raise Employees are paid less Questions 50:50 50:50 InternetAsk the class Lifelines

11 DEFINITION: A group or association of between 2 and 20 people who agree to own and run a business together PARTNERSHIP AGREEMENT CAPITAL Toni offered his friend Marie, the chance to become a partner. They signed a PARTNERSHIP AGREEMENT which included details of the amount of CAPITAL they invested and the way in which profits would be shared. After a few months, Toni realised there were advantages and disadvantages of a partnership, which you can find out about by clicking on the red arrow PARTNERSHIP

12 PARTNERSHIP The ADVANTAGES are: Share expenses, responsibility and decision making The owners have complete control over the business CAPITAL More CAPITAL is available to invest Individual partners can offer specialisms Continuity – partners can cover each others absence

13 PARTNERSHIP DISADVANTAGES The DISADVANTAGES are: Disagreement between partners UNINCORPORATED BUSINESS The business is an UNINCORPORATED BUSINESS. If one partner died, the business would cease to exist UNLIMITED LIABILITY The business has UNLIMITED LIABILITY The number of partners is limited to 20 One partner could be unreliable or dishonest

14 PARTNERSHIP If youve written down all the notes here are some challenges to test your knowledge. Click here for multiple choice questions Click here for essay questions and other tasks

15 TRUE FALSETRUE 1. Partnerships can raise finance easily 2. Partnerships have limited liability 3. Profits arent shared in a partnership 4. This type of business is easy to set up 5. The business will grow quickly 6. There can only be up to 20 partners 7. Expenses will be shared 8. The business partners have complete control over business matters TRUE OR FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE TRUE TRUE TRUE TRUE TRUE FALSE

16 DEFINITION: A company in which a number of shareholders (not more than 50) contribute funds to the company in return for shares. Shares cant be sold on the Stock exchange. A year later after increasing profits further, Toni and Marie wanted to expand the business further but wanted to protect their private possessions from business creditors if the business failed. After seeking advice from their solicitor, they decided to form a Private Limited Company. This made the business very different from a partnership which you can find out about by clicking on the red arrow PRIVATE LIMITED COMPANY

17 The ADVANTAGES are: LIMITED LIABILITY The business has LIMITED LIABILITY CAPITAL Easier to raise CAPITAL than partnerships or sole traders as shares can be sold to a large number of people (only friends or relatives) Toni and Marie can retain control of the company if they dont sell to many shares Management is shared More specialisation can occur SHAREHOLDERS Continuity – the business will still exist if one of the SHAREHOLDERS dies

18 PRIVATE LIMITED COMPANY DISADVANTAGES The DISADVANTAGES are: Expensive to set up Shares cant be sold to the public Accounts have to be lodged with Registrar of companies Less privacy as members of the public can see them Shares cant be sold without the agreement of the other shareholders

19 PRIVATE LIMITED COMPANY If youve written down all the notes here are some challenges to test your knowledge. Click here for multiple choice questions Click here for essay questions and other tasks

20 TRUE FALSETRUE 1. They can sell shares to the public 2. These companies have limited liability 3. There are no shares in this company 4. This type of business is easy to set up 5. The business will grow very slowly 6. There will be a lack of specialist skills 7. Accounts can be seen by the public 8. There are a lot of legal regulations in setting up the business and is expensive TRUE OR FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE TRUE TRUE TRUE TRUE TRUE FALSE

21 D B C A What does limited liability mean? What does limited liability mean? Shareholders are responsible for all the debts Profits are shared Shareholders are limited to the amount of money they can invest Owners are only responsible for the amount of money invested Questions 50:50 50:50 InternetAsk the class Lifelines

22 D B C A What does Ltd mean ? What does Ltd mean ? Limited companyPublic limited company Large companyLifted company Questions 50:50 50:50 InternetAsk the class Lifelines

23 DEFINITION: A company in which an unlimited number of shareholders contribute funds to the company in return for shares. Shares can be sold on the Stock exchange. CAPITAL Toni and Marie were impressed with their large business and they increased profits dramatically by opening new restaurants around the UK. After a few years it was decided that they needed more CAPITAL to expand the business into other countries. To do this they would have to change their company into a public limited company. PUBLIC LIMITED COMPANY

24 The ADVANTAGES are: LIMITED LIABILITY The business has LIMITED LIABILITY It is easier to raise finance as shares can be sold on the Stock Exchange and there are no restrictions on selling the shares SHAREHOLDERS Continuity – the business will still exist if one of the SHAREHOLDERS dies High degrees of specialisation INCORPORATED BUSINESS It is an INCORPORATED BUSINESS

25 PUBLIC LIMITED COMPANY DISADVANTAGES The DISADVANTAGES are: The company is vulnerable to takeovers and SHAREHOLDERS SHAREHOLDERS receive some of the profit Annual accounts have to be published in full May have communication and management problems due to size There are a lot of complicated legal issues to overcome when forming and running a PLC

26 PUBLIC LIMITED COMPANY If youve written down all the notes here are some challenges to test your knowledge. Click here for multiple choice questions Click here for essay questions and other tasks

27 TRUE FALSETRUE 1. They can only sell shares to relatives 2. These companies have limited liability 3. There are no shares in this company 4. This type of business is easy to set up 5. The business could grow very quickly 6. High degrees of specialism will occur 7. Accounts cant be seen by the public 8. There are few legal regulations in setting up the business and is cheap TRUE OR FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE TRUE TRUE TRUE TRUE TRUE FALSE

28 D B C A Which option is an advantage of being a PLC? Which option is an advantage of being a PLC? PLCs can raise finance easily Owner keeps all the profits PLCs have sleeping partners A PLC is cheap to set up Questions 50:50 50:50 InternetAsk the class Lifelines

29 D B C A In a PLC, who owns the business ? In a PLC, who owns the business ? ManagersEmployees ShareholdersGovernment Questions 50:50 50:50 InternetAsk the class Lifelines

30 D B C A Name an advantage of being a PLC? Name an advantage of being a PLC? Unlimited liabilityLimited liability Finance is difficult to raise Only one owner Questions 50:50 50:50 InternetAsk the class Lifelines

31 D B C A What is a holding company? What is a holding company? A company that deals in the shipping industry A company that saves money for companies A company that supplies cover employees A company that holds majority shares in businesses Questions 50:50 50:50 InternetAsk the class Lifelines

32 DEFINITION: the granting by one company to another company of the right to use its products and image FRANCHISORFRANCHISEES Toni and Maries thought it would be a good idea to expand their company further by offering franchises to people. This would mean that they would become a FRANCHISOR, and they would appoint FRANCHISEES to run restaurants under the name of Tonis.This would provide benefits for both the company and the franchisees, which you can find out about by clicking on the red arrow FRANCHISE

33 FRANCHISE The ADVANTAGES to the Franchisor are: They can expand their business without investing large amounts of money FRANCHISEE Risks are reduced because they are shared with the FRANCHISEE Regular royalty payments are made Franchisees are usually more ambitious and hard working than some employees Most franchised businesses are profitable Expansion is much faster

34 FRANCHISE The DISADVANTAGES to the Franchisor are: The companys trade name and reputation can be ruined The initial high costs of the trial operation On going costs of national advertising, training and support of franchisees

35 FRANCHISE ADVANTAGES to the Franchisee The ADVANTAGES to the Franchisee are: FRANCHISOR Advertising and training is usually paid for by the FRANCHISOR The business has a greater chance of success as the product will have a good brand image FRANCHISEE Banks will be more willing to lend money to a FRANCHISEE FRANCHISEE FRANCHISOR The FRANCHISEE benefits from continuous support from the FRANCHISOR

36 FRANCHISE ADVANTAGES to the Franchisee The DISADVANTAGES to the Franchisee are: Less independence than a sole proprietor FRANCHISOR Continuous royalty payments to the FRANCHISOR May not be able to sell the business without franchisors approval FRANCHISOR They could be tied into buying all supplies, at higher prices from the FRANCHISOR

37 FRANCHISE If youve written down all the notes here are some challenges to test your knowledge. Click here for multiple choice questions Click here for essay questions and other tasks

38 FRANCHISE 1. What is a sole trader? 2. Name 2 advantages of being a sole trader? 3. Name 2 disadvantages of being a sole trader? 4. What type of liability does a sole trader have? 5. What is a partnership? 6. What type of liability does a partnership have? 7. What is a private limited company?

39 FRANCHISE 8. Name 2 disadvantages of being a LTD? 9. What is a PLC? 10. Name 2 advantages of being a PLC? 11. What type of liability does a PLC have? 12. What does this mean? 13. What is a co-operative? 14. What is a franchise? 15. What grade do you want to get from this unit?

40 TRUE FALSETRUE 1. A franchisor can raise finance easily 2. Advertising is paid by the franchisee 3. The franchisee can sell anything 4. The business is likely to be successful 5. The business will grow quickly 6. There are less risks involved 7. Profits are shared 8. There company could get a bad name if franchisees run their restaurants badly TRUE OR FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE TRUE TRUE TRUE TRUE TRUE FALSE

41 D B C A What is a franchise? What is a franchise? A completely new idea for a business A large amount of money A business set up under the image of a successful company A business sector of the economy Questions 50:50 50:50 InternetAsk the class Lifelines

42 Your answer is….. CORRECT! Click here to go back Go to the next question

43 Your answer is….. WRONG! Click here to go back Try again!

44 Key term definition: Key term definition: Unlimited liability Unlimited liability Click here to go back the owner(s) of the business is/are responsible for all of the debts and losses of the business the owner(s) of the business is/are responsible for all of the debts and losses of the business For Toni this could mean that if the business went bankrupt, he would lose the capital that he put into the business and could also lose his personal possessions e.g car, house Write the definition in your key-terms book

45 Key term definition: Key term definition: Limited liability Limited liability Click here to go back the owners (Shareholders) of the company cannot be held responsible for the debts and losses of the company they own the owners (Shareholders) of the company cannot be held responsible for the debts and losses of the company they own For Toni and the shareholders this could mean that if the business went bankrupt, they would only lose the capital that he put into the business BUT they wouldnt lose their personal possessions e.g car, house Write the definition in your key-terms book

46 Key term definition: Key term definition: Franchisor Franchisor Click here to go back A firm which allows a person to trade under its name and to sell its product for a fee A firm which allows a person to trade under its name and to sell its product for a fee For Tonis business this would mean that people would have to pay royalty fees to operate under the Tonis name Write the definition in your key-terms book

47 Key term definition: Key term definition: Franchisee Franchisee Click here to go back An individual or business which pays another firm for the privilege of being allowed to sell its branded products An individual or business which pays another firm for the privilege of being allowed to sell its branded products For other individuals/businesses this would mean that they would have to pay royalty fees to operate under the Tonis name Write the definition in your key-terms book

48 Key term definition: Key term definition: Partnership agreement Partnership agreement Click here to go back This is the written and legal agreement between business partners. It is not essential for partners to have such an agreement but it is always recommended This is the written and legal agreement between business partners. It is not essential for partners to have such an agreement but it is always recommended For Toni and Marie this would be a written contract concerning the running of the business Write the definition in your key-terms book

49 Key term definition: Key term definition: Unincorporated business Unincorporated business Click here to go back a business which doesnt have a separate legal identity a business which doesnt have a separate legal identity For Toni and Marie this would mean that if one of them died then the partnership would end. Write the definition in your key-terms book

50 Key term definition: Key term definition: Incorporated business Incorporated business Click here to go back a business which has a separate legal identity a business which has a separate legal identity For Toni and Marie this would mean that if one of them died or any of the shareholders then the business would continue to exist. Write the definition in your key-terms book

51 Key term definition: Key term definition: Shareholders Shareholders Click here to go back These are the owners of a limited company. They buy shares which represent part ownership of a company. These are the owners of a limited company. They buy shares which represent part ownership of a company. The shareholders of Tonis will all have a number of shares in the company. Write the definition in your key-terms book

52 Key term definition: Key term definition: Capital Capital Click here to go back the money invested into the business by the owners the money invested into the business by the ownersOR goods such as premises, machinery and equipment that a business owns Tonis capital could be the money hes put into the business or the actual restaurant building Write the definition in your key-terms book


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