2 Business Ownership Sole Trader: Owned, financed and controlled by one individual but can employ other staffCommon in local building firms, small shops, restaurants, butchers, etc.
3 Business Ownership Sole Traders: Advantages Easy to set up Personal incentive –keep all the profitsmake key decisionshigh degree of controlFlexibilityAbility to offer personal service
4 Business Ownership Sole Traders: Disadvantages Unlimited Liability Limited access to capitalPotential for long hoursPressure of being solely responsibleLack of continuity – business ceases once owner dies
5 Business Ownership Partnerships: Owned, financed and controlled by upwards of 2 partnersTerms of Partnership agreed through contractBound by the terms of the Partnership Act 1890Common in professions – lawyers, accountants, architects, surveyors, estate agents, vets, etc.
6 Business Ownership Partnerships: Advantages Greater access to capital Shared responsibilityGreater opportunity for specialisationEasy to set up
7 Business Ownership Partnerships: Disadvantages Unlimited Liability (However since 2001, Partnerships can apply to be Limited Partnerships)All partners liable for the debts of the othersPartnership dissolved on death of one partnerPotential for conflictDecisions of one partner binding on the restLimited access to capital
8 Business Ownership Limited Companies: Private Limited Company (Ltd) Owned by between 1 and 50 shareholdersPublic Limited Company (PLC) Owned by minimum of 2 but no maximum number of shareholdersHas a separate legal identity – the company can sue and be suedMore complex to set upMinimum share capital of £50,000
9 Business Ownership Limited Companies: Memorandum of Association Must Register with Registrar of Companies at Companies HouseMemorandum of AssociationDetails of the nature, purpose and structure of the companyArticles of AssociationDetails of the internal rules of the companyCertificate of Incorporation – allows the company to tradeShareholders have limited liability – can only lose what they agreed to put into the company – no personal liabilityPLCs – shares traded on Stock ExchangeLTDs – shares only bought and sold with agreement ofexisting shareholders
10 Business Ownership Limited Companies – Issues Divorce between ownership and controlPotential for diseconomies of scale – communication, decision making, etc.Must publish accountsPLCs – shareholders may be large institutions – pension funds, insurance companies, etc.PLCs - Share value subject to volatility – affects company valuePLCs – can be large, complex, possess market power
11 Business Ownership Co-operatives: Ownership, finance and control in hands of ‘members’Exists for the benefit of ‘members’Consumer co-ops – members buy goods in bulk, sell to members, divide profits between membersWorker co-operatives – workers buy the business and run it – decisions and profits shared by membersProducer co-operatives – producers organise distribution and sale of products themselves
12 Business Ownership Franchises: Method of business ownership backed by established ‘brand’ nameOwner gets to run a business with less ‘risk’Owner buys the right to use the established company’s name, format products, logos, display units, methods, etc.Speedy way for business to expandBecome very popularOwner – (Franchisee) responsible for debts, pays a royalty to owners of the brand, keeps any remaining profitFranchisee – pays a fee for the purchase of the franchiseCommon franchises – Body Shop, McDonalds, Costa Coffee, Subway