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m Definition : p

 



  
 
m cole trader is also known as sole proprietor.
m cole traders are the most common form of
business.
m cole traders is own & control by one person.
m They may work alone or may employ other
people to run the business.
m ctart ʹ up capital for a sole trader is usually
obtained from personal savings & borrowing.
m The business is unincorporated ʹ the owner is
legally the same as the business.
m The sole trader could end up losing his / her
personal possessions if the firm collapse.
m cole trader does not pay corporate taxes but
pays self employment taxes on the profit made
m No legal formalities involved in setting up the
business.
m ^owever, under the À





 , the owner must conform to 3
basic requirement :

1. The name of owner must be displayed on all

business documents.
2. The owner must disclose information relating
to ownership to anyone who has dealings
with the business.
3. A notice concerning ownership must be
displayed in the business premises.
 p

m Êasy to set up
m Owner has complete
control
m Owner keeps all profits
m More flexible ʹ time &
pattern of working
m More privacy
m Personal contact with
staff & customers
m Financial advantages in
term of lower taxes &
accountancy fees.
? 

m imited source of
finance
m Unlimited liability
m ack of continuity
m Workload & stress
m Full personal
responsibility for
decision & for the debt
of business
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 PARTNÊRc^ Pc

Does not pay income taxes

Êach partner has to report their share of business
profits or losses on their individual tax return

An unincorporated business organisation
‘


2
20 persons (professions such as
solicitors and accountants cannot have shares in this
entity)



Personal funds of each partner

an pool their funds together unlike
sole traders

Raise money from silent partner
   
unlimited liability but shared among
partners
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More financial strength; more people who can
invest yet still quite easy to set up.

^ave division of labour and specialization so
The firm's client base is likely to be much
larger.

More financial privacy; do not have to to
publicize their records.
 c
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Unlimited liability; problem occurs when
deciding which partner's personal assets
should be used to repay debts.

^arder and it takes longer to make a desicion.
May cause disagreements and confict.

ack of continuity if partner dies or leaves the
firm.

Must have a huge amount of mutual trust.

Difficulties in raising capital.
x
 
 ͻ Businesses that are owned by
companies their shareholders

ͻ ndividuals / businesses that

chareholders invested their money to provide
capital 4 a company

ompanies are more commonly known as

corporations in n. america
sometimes called joint
stock companies because the
shares(stocks) are jointly held by numerous people
/institution.
 x

 

ë There are differences between

shareholders(owners) and business itself.
ëompany is separate entity thus has its own
legal rights and duties


  
m chareholders do not have to bear the
responsibility of the company͛s debt thus will
not tend to lose personal belongings if the
company goes into arrears.
m Maximum loss 4 shareholders
ë ose value of investment
there are limits to how much they can lose
this is to safeguard investors in the stock
market
imagine

 c

m cetting up companies
complicated and expensive
m Rules and regulations to obey in order 4 shares to be
sold on the stock exchange.
m cuch legislation is to protect investors in business
they do not run or control
m Board of directors is elected based on their skills and
expertise
m One share =one vote
 
 x
 

m This term used to clarify all companies have

limited liabilities
m There are two types of limited companies



 






 


 r
 
 x
 
m annot raise share capital from general public
m chares sold to private family members and friends
m Word ͚ltd͛ or ͚limited͛ after its name
m chares cannot be traded without agreement from BoD

Directors maintain overall control of business
m Advantage
greater control as shares cannot be traded

cheaper to set up than public ltd.
 rx
 x
 
m Able to advertise and sell its shares to general public
m arry letters ͚P͛ after its name
m Disadvantage
there͛s


 
shares owners ability to control business
exposed to  
from other
investors that seek majority stakes
in the company
 Before commencing trading
both public & private ltd. ompany must produce
2 doc.
m |[

 
  

fundamentals details of company
e.g: name, main purpose, registered address, original
amount of share capital invested
m |
   
  

stipulates internal regulations & procedures of company

Details include:
rights
roles & power of the
BoD+shareholders

administrative issues; eg: conduct of AGM, procedures to
appoint directors
how profit distributed.
 ‰



m Occurs when business first sales all/part of business

to shareholders
m Allows it to be listed on a stock exchange
generates
additional source of finance


  
 

 
m Dividends
m apital growth
m Voting power
 




Three main process:
m chareholders;

vote on  
 re
elect the BoD

ask questions to ÊO, directors, chairperson
about various aspects of the company

approve the previous yaer͛s financial accounts
  
  
xx 
m Reporting of profits or losses
m Assets of business
m Where cash has been spent during the year

accounts are scrutinized by external auditors
(chartered accountants) before distributed to
shareholders
   
 x
 
m an raise large amount of capital by selling shares.
m The money raised through selling shares become permanent
capital.
m The initial income from selling shares stays with the company.
m Due to limited liability, easy to attract private & commercial
investors
m Benefit from continuity. This is due to (divorce of ownership and
control), any problems with an owner, the company could still
continue as a separate entity from that owner.
m Directors own large amount of shares, thus they have incentive to
perform well to achieve capital growth & dividends from the shares
m Due to larger scale business, can benefit from 

 


 t is cheaper for company to borrow money than
other form of business, because commercial lenders see it as
less of financial risk.
m an hire specialist directors & managers . Êmploy specialist
staffs
marketers, lawyers, accountants thus can productivity
of business
   
 x
 
m Financial information provided to all shareholders
time consuming &
expensive exercise ʹ no privacy
m More bureaucracy involved in setting up ltd company
e.g: preparation of the 2 doc.
m At least 25% is paid for business use.
e.g: lawyers hired to ensure documents is legally accurate, advertising
and promotion of company͛s share floatation, hosting AGM.
m Dividends only paid to shareholders when profit. Êven if there is, the
BoD may decide to retain it 4 financing projects.
m ommunications problem. When the firm is large, services and
relationships may become impersonal to both customers and
employees.
x 

mooperatives
m dentity of ooperatives
mAdvantages of ooperatives
mDisadvantages of ooperatives
  rc

A legal entity owned and democratically
controlled by its members

Members often have a close association with the
enterprise as;
(a) producers
(b) consumers
(c) employees

Often share their earnings with the membership
as dividens not according to the value of their
capital shareholdings.

  rc
ooperatives are based on the cooperative values of
"self
help, self
responsibility, democracy and equality,
equity and solidarity" and the seven cooperative
principles :

Voluntary and Open Membership

Democratic Member ontrol

Member Êconomic Participation

Autonomy and ndependence

Êducation, Training and nformation

ooperation among ooperatives

oncern for ommunity

c  r

Êxists for the benefits of its patron members

Members have a financial interest in the success of the
cooperative as they are also the owners

Members have a voice in the control of the
organization; thus providing the kind of service
they want.

Thus,

tie the patrons to the organization by making
them full partners

help build an assured volume of business

efficient operation of the cooperative
 c
c 
 r

imited flexibility for the manager to operate
the co
op; a real disadvantage in competition
with a
commercial business.

ower salary cannot hold competent managers
and other employees.

The mass of members may lose interest in
running the organization
 


 r

mWhat is ^olding ompany?
mAdvantages of ^olding ompanies
mDisadvantages of ^olding
ompanies
mÊxamples
     
x
 
'A holding company is a company that
controls other companies but is not involved
in their day to day running.
' t is a company or firm that owns other
companies' outstanding stock.
' t usually refers to a company which does
not produce goods or services itself, rather its
only purpose is
  



 
' This doesn't mean that the holding company
owns all of the subsidiary's stock, or even a
majority of it.

' ^owever, holding companies that control 80% or

more of the subsidiary's voting stock gain the
benefits of tax consolidation, which include tax

free dividends for the parent company and the
ability to share operating losses.
   
   


 
> Acquiring a controlling interest in a subsidiary

> ^olding companies allow the reduction of risk for the

owners and can allow the ownership and control of a
number of different companies.

> The ability to control operations with a small percentage of

ownership and, thus, smaller up
front investment

> ^olding companies can take risks through subsidiaries, and

limit this risk to the subsidiary alone rather than placing the
parent company on the line

> Êxpansion can happen through simple stock purchases in

the public market, which avoids the difficult step of gaining
approval from the subsidiary's board of directors
   
   


 
> f less than 80% of the subsidiary is owned by the parent,
the holding company pays  on the federal,
state, and local levels

> A holding company can be forced to dissolve more easily

than a single merged operation

> A holding company may expand through the use of

leverage or debt, building a complex corporate structure
that can include unrealized values, and creating a risk if
interest rates on debt or the valuation of the assets posted
as collateral for loans change dramatically.
 Ê pr
Ê
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|: Manufacture
  
: Business cervices > Other
Business cervices
 r

: Web Design, Ê
ommerce, Web
Maintainance, Trading, RetailYear
Ê 
: 2009

x
mWhat is Franchise?
m^ow Franchising works?
mAdvantages of Franchise
mDisadvantages of Franchise
   
x
š A form of business organization in which a
firm which already has a successful product or
service (the franchisor) enters into a
continuing contractual relationship with other
businesses (franchisees) operating under the
franchisor's trade name and usually with the
franchisor's guidance, in exchange for a fee.
  
x
 


The franchisee purchases a franchise from the

"franchisor"

The franchisee must follow certain rules and

guidelines already established by the franchisor

n most cases the franchisee must pay an

ongoing franchise royalty fee, as well as an up

front, one
time franchise fee to the franchisor
   
 
 

x
" 

  
The corporate image and
brand awareness of the company is already
established. onsumers are always more
comfortable purchasing items from a familiar
name or company they trust.
" | 
The franchisor usually provides
extensive training and support to the franchise
owner.
" c  
cince the franchise company
already has the business model in place you can
focus on running a successful business.
   
 
 

x
â 

The initial cost of a franchise can be
$50,000 or more on top of the cost of
equipment, inventory, and business space.
franchisees to pay ongoing a percentage in
royalties or franchise fees
⠑ 
 

Franchisors place a
number of restrictions on their franchisees
including limitations on products, pricing,
employee performance and policies, territory,
marketing, and other areas critically important
to the success of the business.
â ±6 p
 
Name recognition can
also be a hindrance to the business,
particularly if the other franchises or the
franchising company itself is receiving bad
press or suffering from a poor public
perception.
â

6
r
 
Unable to expand
to surrounding areas by purchasing another
franchise due to the territorial rights of other
owners within the franchise
ß 

 
Definition
haracteristics
Types
Duties and Rights
Advantages
Disadvantages
Joint Venture Vc Partnership
    ß 

m Definition :
p
    






     

   
 


 
 


m They combine their efforts, ideas, or property for a single

project or related series of transactions.
m Joint ventures can range from a small activity to a huge, multi

million dollar project.
   

x
x
 ß 

m r
 

joint venturers share profits and losses
equally
m  

a joint venture terminates upon the completion of
the project or series of transactions
m | 

Unlike a partnership, a joint venture does not
terminate upon the death or incapacitation of one joint
venturer. A joint venturer does have the power to terminate
the relationship at any time once the project or transaction is
complete.
 |


 
Joint ventures are formed in all kinds of business realms.
Êxamples include:
m r 

For example, independent contractors can
combine resources through a joint venture to get a major
contract to build a housing development.
m 

 

For example, General Motors and Volvo Trucks
formed a joint venture to build heavy duty trucks. This is a
joint venture instead of a partnership because the two
companies conduct business separately except for this related
series of transactions (manufacturing trucks).
  

   
 

Parties in a joint venture have duties to one another. cuch
duties include:

m ‰
 
 A fiduciary duty basically means that
each party has a duty to act in the best interests of all
involved. Acting for your own best interests is a breach
of fiduciary duty (which can also be a breach of
contract if the joint venture was formed by a contract).
m 
 All information regarding the joint venture
shall be disclosed to the involved parties. This becomes
an issue when certain trade secrets, patents, or other
sensitive information is involved.
m
 y  f a third party is affected by the
joint venture, all parties involved are   
 . For example, a joint venture is formed
to construct a building. During construction, a
brick falls and injures a pedestrian. All joint
venturers would be liable for the pedestrian͛s
injury.
  

 ß 



Parties in a joint venture have certain rights. cuch rights include:

m Êqual control, influence, and power over the project or

transaction.
^owever, the contract can give one party complete control.

m Êqual ownership of the project (and thus equal shares of

profits and expenses).
   


By teaming up with other people or

businesses in a joint venture, you can:

m extend your marketing reach

m access needed information and resources
m access new markets that would be
inaccessible without the partner
   


m Unable to identify clear objectives (visions and

goals) of their joint venture ʹ results in
divergent goals.
m Absence of mutual trust and acceptance.
m One or more partners depending on the other
partner to complete the project.
 ß 
c
r


m JV teamed together for particular projects BUT
Partnerships joined together to run a business in
common.
m Partnerships just aimed in making profits BUT in JV, not
just the profits that binds them together but also other
specific purposes (e.g. R&D).
m Partnerships lasts for many years BUT for JV, they are
for limited period only ʹ until goal has been achieved.
m Partnerships, they belong to only ONÊ group W^ÊRÊ
Ac for JV, they belong to their respective firms or
property.