1. Ownership

2. UK business ownership This means: They are owned by private individuals These individuals risk their own money The owners’ reward is the profit they make. Most businesses in the UK are privately owned.

3. Private ownership options Sole trader – 1 owner Partnership – 2 people or more Private limited companies – often a family-run business with the protection of limited liability Public limited companies – large organisations whose shares are traded on the Stock Exchange Franchises – small business trading with agreement of large firm Cooperatives – collectively owned by workers/customers

4. Key difference Sole traders and partnerships have unlimited liability. Owners are responsible for all debts and may have to sell personal possessions. Companies have limited liability. Owners can only lose their investment even if the company has huge debts.

5. Sole traders Easy to set up and give a personal service Owner independent – can make quick decisions Minimum of paperwork Knows customers – helps to avoid bad debts Unlimited liability Long hours, no cover for holidays/sickness Capital may come from savings Needs business skills Business ends on death Benefits Drawbacks

6. Partnerships Easier to raise capital Problems/ideas can be discussed Greater range of skills/expertise Cover for holidays/sickness Unlimited liability Profits are shared May be disagreements Decisions/actions legally binding on all partners Death of a partner means share needs repaying Benefits Drawbacks

7. Key points about companies Each company has its own identity in law. The company employs staff, not the owner(s). The company owns assets, not the owner(s). The company operates until it is formally wound up or goes into liquidation. The company pays corporation tax on its profits.

8. Private limited companies Limited liability Minimum of 1 director and 1 shareholder Easy to set up/affairs still private Easier to raise capital/borrow from bank Share transfers need agreement of all Cannot sell shares to the public More regulations to comply with Accounting procedures may be more costly Death of shareholder has no effect on company BenefitsDrawbacks

9. Public limited companies Limited liability Increased capital as public can buy shares Minimum of 2 directors and 2 shareholders Shares increase in value if company successful Operating large scale can lower costs per unit Many regulations to comply with Accounts (and problems) are public knowledge Shareholders may sell shares if dividends poor Original owner may lose overall control Benefits Drawbacks

10. Review of main types of private ownership Sole traders – suitable for one person running small business with low risk/little investment required Partnership – suitable for professional groups, husband/wife businesses, small business needing different skills Private limited company – suitable for family business, essential if risk considerable, eg through expensive stock Public limited company – suitable for large national/international operations

11. Private ownership review Other alternatives are: Cooperatives – societies which operate for the benefit of their members (whether customers or workers). Franchises – where a large company allows a small operator to trade on name in return for share of profits. Most private businesses are owned by sole traders, partners or are companies.

12. Cooperatives Each owner has equal share/one vote Profits are shared equally Can have limited liability status Workers can decide whether to be owners Obtaining finance may be difficult Decisions by consensus take time ‘Hard’ decisions may be difficult to make ‘Equality’ can be hard for good leaders/workers Benefits Drawbacks

13. Franchise Less risky than starting own business Selling a known name Advice and guidance available Owner keeps most of profit Share of profit goes to franchisor Franchisee must abide by legal agreement Only franchisor products can be sold Success very dependent on popularity of product Benefits Drawbacks

14. Public ownership Term used for enterprises owned and controlled by the state. Aim is to provide services needed by everyone, regardless of income or wealth, eg health and education. Mainly financed through taxation.

15. Examples of public ownership Central government departments, eg Department of Health Local authorities and councils Public corporations, eg BBC, Bank of England, British Nuclear Fuels

16. Owner liabilities 1 All owners must: Produce annual accounts Pay tax on profits Operate the business within the law Abide by specific agreements (eg Partnership or Franchise agreement) or trade/professional regulations relating to their activity

17. Owner liabilities 2 Sole traders/partners are personally liable for debts Shareholders in companies can lose investment if business fails Company directors can be held personally liable in law in certain circumstances Franchise operators may have to meet specific sales targets.

18. Factors which influence changes of ownership More capital required to finance expansion or extend operations More skills/abilities required Greater security/less risk required Change of business activity Changes in legal regulations and requirements