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Business Ownership
The Private Sector

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Business Ownership
Sole Trader:
Owned, financed and controlled by one individual but can employ other staff

Common in local building firms, small shops, restaurants, butchers, etc.

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Business Ownership
Sole Traders: Advantages Easy to set up Personal incentive keep all the profits make key decisions high degree of control Flexibility Ability to offer personal service

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Business Ownership
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

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Business Ownership
Partnerships:
Owned, financed and controlled by upwards of 2 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.

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Business Ownership
Partnerships: Advantages

Greater access to capital Shared responsibility Greater opportunity for specialisation Easy to set up

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Business Ownership
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

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Business Ownership
Limited Companies:
Private Limited Company (Ltd) Owned by between 1 and 50 shareholders Public Limited Company (PLC) Owned by minimum of 2 but no maximum number of shareholders Has a separate legal identity the company can sue and be sued More complex to set up Minimum share capital of 50,000

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Business Ownership
Limited Companies:
Must Register with Registrar of Companies at Companies House

Memorandum of Association Articles of Association

Details of the nature, purpose and structure of the company Details of the internal rules of the company

Certificate of Incorporation allows the company to trade Shareholders have limited liability can only lose what they agreed to put into the company no personal liability PLCs shares traded on Stock Exchange LTDs shares only bought and sold with agreement of existing shareholders

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Business Ownership
Limited Companies Issues Divorce between ownership and control Potential for diseconomies of scale communication, decision making, etc. Must publish accounts PLCs shareholders may be large institutions pension funds, insurance companies, etc. PLCs - Share value subject to volatility affects company value PLCs can be large, complex, possess market power
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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 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

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Business Ownership
Franchises: Method of business ownership backed by established brand name
Owner gets to run a business with less risk Owner buys the right to use the established companys name, format products, logos, display units, methods, etc. Speedy way for business to expand Become very popular Owner (Franchisee) responsible for debts, pays a royalty to owners of the brand, keeps any remaining profit Franchisee pays a fee for the purchase of the franchise Common franchises Body Shop, McDonalds, Costa Coffee, Subway

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