IGCSE Business Studies Types of Business Organisation

Learning Outcomes Describe the main features of sole traders, partnerships, limited companies Understanding the differences between sole traders and partnerships Understand the differences between unincorporated businesses and limited companies Recommend suitable forms of business organisation to the owners and managers in a given situation

Reminder……Types of Organisations Ownership Types Private Sector Public Sector Unincorporated Sole Trader Partnership Incorporated Private Limited Company Public Limited Company Public Corporations Public Services Local Authorities Profit Non-Profit Charities Trade Unions NGOs Social Organisations Advocacy Orgs

Incorporation….. What does it mean? Incorporation is the forming of a new corporation (a corporation being a legal entity that is effectively recognised as a person under the law).

The Process of Incorporation Prepare Articles and Memorandum of AssociationSubmit to the Registrar of CompaniesPay the registration feeWait for acceptanceRegister for Corporation tax

Legal Benefits Protection of personal assets (Limited Liability) Continuity (ownership can be transferred) Profits taxed at corporate rates Option to raise funds by selling shares Company has a separate credit rating Company can have a bank account Why would each of these be useful?

Obligations of Incorporated Businesses To have at least one shareholder and at least one director To inform if there are any changes to the details of the company File company accounts and company tax return yearly To keep detailed financial records for at least 6 years after each financial year (or be fined) To file an annual return each year (currently costs £40)

UNINCORPORATED BUSINESSES Let’s assume the business has decided against incorporation.. Incorporated V

Your options….. If you want to own a business on your own you will be a SOLE TRADER If you want to own a business with other people you will be a PARTNERSHIP Owners of these types of business have UNLIMITED LIABILITY

Task…. 5 mins In pairs discuss and write 2 lists. Reasons why someone would prefer to set up a business on their own…. Reasons why someone would prefer to set up a business with other people….

The benefits of being unincorporated Very easy to set up Register as being self employed and you’re good to go None of the paperwork and associated costs of setting up as a company

Rules of Partnerships…. Can have 2-20 owners At least 1 partner must have UNLIMITED LIABILITY Has the option of drawing up a DEED OF PARTNERSHIP

Question…. Why should someone be extremely cautious when entering into a partnership?

Homework Task Construct a Deed of Partnership for the business including the following sections: name of the business and details of its activities names of partners and their duties and responsibilities (give reasons) amount of capital provided by each partner how the profits and losses will be shared out explanation of how decisions will be made and any voting rights arrangement for retirement, death or change of partners Your challenge is to be interesting, not realistic!

INCORPORATED BUSINESSES Let’s assume the answer is YES! Incorporated V

Types of Companies As a new business you could be a PRIVATE LIMITED COMPANY (LTD) Later on you may decide to become a PUBLIC LIMITED COMPANY

Limited Companies Are Incorporated Have Shareholders rather than owners May have from 1 up to thousands of Shareholders Have a Board of Directors

Task – 5 mins Using your textbook and/or the internet Find out the differences between Private Limited Companies and Public Limited Companies

BECOMING A PUBLIC LIMITED COMPANY

Key Questions….. Why would a Private Limited Company want to become a Public Limited Company? Can any Ltd become a Plc? What process would they have to go through to become one? Are there any cons of being a Public Limited Company (as opposed to remaining a Ltd?)

A word from the lovely Richard Branson Fortunately we're not a public company - we're a private group of companies, and I can do what I want. What does he mean by this?

Task – Dell Delisting Open and read the article “Dell wins back his company’ Answer the following questions.... What is meant by the term delist? Why have Dell and their competitors struggled in recent years? How does Michael Dell plan to turn the company around? Why does Michael Dell want to delist? Why is there opposition to the delisting?

Task - Double Bubbles Complete the double bubble diagram comparing Sole traders and Partnerships Homework: Complete the other two double bubble diagrams

Sole Trader Partnership

Private Limited Company

Public Limited Company

CHOOSING AND RECOMMENDING A BUSINESS STRUCTURE

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