Forms of Business organisation (1/3)

Identify and explain the main features of different forms of business organisation Describe the main features of sole traders, partnerships, limited companies, franchises and joint ventures Understand the differences between sole traders and partnerships Understand the differences between unincorporated businesses and limited companies

Roman Abramovich Owner of Chelsea Football Club

In June 2003, he became the owner of the companies that control Chelsea Football Club in the United Kingdom.
Born: Nationality: 24 October 1966 Russian

Richard Branson Owner of part of all of the Virgin companies

Richard Branson is the 261st richest person in the world

Types of Business Ownership

There are five main types of ownership:
Sole trader Partnership Public Corporations Private limited company (Ltd) Public limited company (Plc)

Unincorporated Sole trader

Partnership

Sole Proprietor
Business owned by one person Can also be called a sole trader Usually a very small business

Try to think of two people who might be sole proprietors?

(Hint: Plumbers are often sole proprietors)

Examples of Sole traders

Builders Painters Hairdressers Window cleaners Mechanics Plumbers Etc.

Advantages of sole traders

Easy and cheap to set up The owner is in complete control of the business Owner is able to keep all the profit the business makes

Disadvantages of sole trader

Unlimited liability Shortage of capital (money) Illness/holidays Hours of work Shortage of skills Continuity - the business, in its present form, ceases on the death of the owner

What is a partner?

Partnerships
Owned by a minimum of two and a maximum of 20 people

Examples of Partnerships
Doctors Dentists Solicitors Accountants Surveyors Etc.

Why might partnerships be better than sole traders? Write down your ideas

Advantages of the partnership

More capital can be introduced to help business grow Each partner may have a different specialist skill The work of the business can be shared Sleeping partners invest in the business, but do not work in the business

Disadvantages of the partnership

Profit has to be shared Disagreements Shortage of capital Unlimited liability Continuity - the business, in its present form, ceases on the death of one of the owners

How do partnerships work out how profit is shared?

Deed of partnership
This is a legal document that sets out:
Who invested how much capital How the profits are split How to resolve disputes

Activity True or false

Statement True False
A partnership usually has between 2 and 20 partners
The deed of partnership usually states how profits will be shared amongst the partners

Sole proprietors find it easy to borrow money from the bank

A sole proprietor is owned by more than one person Partners often use their own savings to set up the business One disadvantage of a sole-proprietor business is that it will have unlimited liability

Unincorporated businesses ALL have five features

Match the pairs

Continuity Income tax is paid on the profits which the business may make The business, in its present form, ceases on the death of one of the owners

Financial Information

Bankruptcy

Remains private to the business

Unlimited liability

This occurs when the business cant pay its debts The owners of the business are personally liable for any debts which the business may have

Tax on Profits

Match the pairs - answers

Continuity Income tax is paid on the profits which the business may make The business, in its present form, ceases on the death of one of the owners

Financial Information

Bankruptcy

Remains private to the business

Unlimited liability

This occurs when the business cant pay its debts The owners of the business are personally liable for any debts which the business may have

Tax on Profits

Unincorporated business features

Good Unlimited liability Tax on profits Continuity Private financial information Bankruptcy Bad Neither

Public Corporations

Public Corporations
Owned and controlled by the Government The Corporations get some money from the Government, but they also make money themselves Any surplus money goes to the Government

Objectives of Public corporations

May include: To keep prices low so that everybody can afford the service To keep people in jobs so that unemployment does not rise To offer a service to the public in all areas of the country

Examples of Public Corporations

QTel Qatar oil and Gas BBC NHS

Advantages and Disadvantages

Companies owned by the government will ensure that consumers are not taken advantage of by privately owned monopolies If an important business is failing the government can step in to nationalise it Important public services such as TV and radio broadcasts are often in the public sector. No private shareholders to insist on high profits and efficiency Subsidies can lead to inefficiency as managers will always think that the government will help them out Often there is no close competition Government can use these businesses for political reasons