1. Introductory Business Concepts
Forms of Business Organisation
(special thanks to Geoff Leese)

2. Objectives
Consider the different types of business organisations operating in the private sector
Consider the advantages & disadvantages of each type of organisation

3. Types of Business Organisations

4. Sole Trader
Owned financed and controlled by one individual but can employ other staff
Traditionally common in local building firms, small shops, restaurants, butchers
Today many people are setting up their own businesses by creating small web-based companies working from home

5. Sole Trader Advantages Requires little capital Easy to set up
Personal incentive –
keep all the profits
make key decisions
high degree of control
Flexibility
Ability to offer personal service

6. Sole Traders Disadvantages Unlimited Liability
Limited access to capital
Potential for long hours
Pressure of being solely responsible
Lack of continuity – business ceases once owner dies
No cover for illness

7. Business Organisations
Sole traders can overcome these disadvantages by becoming a partnership

8. Partnerships Owned, financed and controlled by between 2 & 20 partners
Terms of Partnership agreed through contract
Bound by the terms of the Partnership Act 1890
Common in professions – lawyers, accountants, architects, surveyors, estate agents, vets etc

9. Partnerships Advantages Each partner contributes capital
Shared responsibility
Greater opportunity for specialisation
Easy to set up

10. Partnerships Disadvantages
Unlimited Liability (However since 2001, Partnerships can apply to be Limited Partnerships)
All partners liable for the debts of the others
Partnership dissolved on death of one partner
Potential for conflict
Decisions of one partner binding on the rest
Limited access to capital

11. Private limited companies
Usually small family business
Owned by between 2 and 50 shareholders
Directors elected by shareholders

12. Private limited company
Advantages
Limited liability
Shareholders contribute capital
Protected from takeovers
Disadvantages
Still limited capital
Limited economies of scale

13. Public limited companies
Owned by minimum of 2 but no maximum number of shareholders
Example Boots
Directors elected by shareholders
Has a separate legal identity – the company can sue and be sued
Minimum share capital of £50,000

14. Public limited companies
Advantages
Large amount of capital can be raised
Economies of scale
Disadvantages
Unwanted takeover possible
Can be remote from customers
Potential diseconomies of scale

15. Co-operatives Controlled by a committee
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 members
Worker co-operatives – workers buy the business and run it – decisions and profits shared by members
Producer co-operatives – producers organise distribution and sale of products themselves

16. Franchises
Method of Business Organisations backed by established ‘brand’ name
Franchisee – pays a fee for the purchase of the franchise
Common franchises – Body Shop, McDonalds, Costa Coffee, Subway

17. Franchises Advantages Owner gets to run a business with less ‘risk’
Owner buys the right to use the established companies name, format products, logos, display units, methods etc.
Speedy way for business to expand
Become very popular

18. Franchises Disadvantages Owner – (Franchisee) responsible for debts
Franchisee pays a royalty to owners of the brand
Franchisee must adhere to pricing policy of parent company and so it can be difficult to realise high profits

19. Conclusion Considered the various types of business organisations
Considered the advantages & disadvantages of each
Useful Websites
Lots of very useful stuff there!