Business ownership

• What are the two types of corporate businesses?


  Public and private limited companies
• What are the two types of non-corporate businesses?

  Sole traders and partnerships
• Private sector businesses

  Part of the economy made up of private enterprises - businesses owned and controlled by individuals

  two broad categories - corporate/non-corporate
• Corporate businesses


  • Businesses that have a legal identity that is separate from their owners
  • Limited liability
• Limited liability


  • Financial responsibility of a company's debts restricted to the amount owners/shareholders has individually invested in
  • personal assets are safe
• Private limited company


  • Relatively small
  • Share capital must not exceed £50,000
  • Shares not sold on the Stock Exchange
  • Shares cannot be bought and sold without the agreement of other shareholders
• Public limited company


  • Minimum share capital of £50,000
  • Shares can be traded on the Stock Exchange
  • Shares can be bought by any business or individual
  • Have to publish many details of their financial affairs, unlike LTD
• How does a business become a PLC?


  Memorandum of Association + Articles of Association (documents sent to Registrar of Companies)

  Once approved, company receives Certificate of Incorporation
• Non-corporate businesses


  • Businesses that do not have a separate legal identity from their owners
  • Unlimited liability
• Unlimited liability 


  • Financial responsibility is entirely on owners
  • Personal assets at complete risk if the business fails
• Sole trader


  • One person owns the business and has complete control over it
  • Could have a number of employees
  • Common in retail +services (e.g. plumbing)
• Partnership 


  • 2-20 people owning and running the business together
  • They contribute capital and expertise to the business
  • Each partner shares responsibility to its success/failure
  • Deed of Partnership states distribution
  • Common in professions (e.g. dentistry)
• Not-for-profit businesses

  Organisations that have business objectives other than making a profit, also known as 'social enterprises'
• Non-profit objectives


  • Provide services to local communities
  • Give people job-related skills (i.e. for people from disadvantaged backgrounds)
  • Fair-trading activities
• Mutuals 


  Private businesses whose ownership base is made up of their clients and policy holders

  This type of business runs for the benefit of their members (e.g. cooperatives)
• Public sector businesses


  Part of the economy that is owned and controlled by the government or local authorities (services such as police, fire service, NHS)

  Many key industries (coal, steel, water) were sold off to private sector through a privatisation process
• Privatisation 


  Converting government-owned and government-controlled businesses to the private sector
• Reasons for choosing different forms of business (unincorporated/incorporated)


  • Formalities and expenses (sole traders are easy to set up)
  • Size and risk
  • Objectives of the owners (i.e. growth)
• Reasons for changing business form

  • Circumstances
  • Capital
  • Acquisition or takeover (change of structure by another company)
• Shareholders


  Owners of a limited company and include any person, company or other institution that owns at least one share
• Dividend 


  A share of the after-tax profit of a company distributed to shareholders according to the number of shares held by them
• Roles and rights of shareholders


  • Involved in major decision making
  • Attend meetings discussing decisions
  • Removal of directors
  • Changing the name of a company
• Reasons to invest in shares


  Income: Shareholders are entitled to dividends

  Capital growth: Shareholders hope that the value of their shares will increase over time
• Demand and supply with share prices?


  When demand is greater than supply, the price will go up

  When supply is greater than demand, the price will go down
• Reasons why shares and dividends might fluctuate in value

  • Performance
  • Expectation of better or worse profit performance
  • Changes within the market or competitive environment
  • World uncertainty (i.e. conflicts around the world)
• Market capitalisation 


  A valuation of the company

  • share price x number of shares issued