1.5.4 Forms of Business

• Business Form


  The legal structure of a business eg. sole trader, partnership, franchise, online private limited (Ltd) or public limited (Plc)
• Benefits to a Sole Trader


  -Easy and inexpensive

  -Complete control

  -Keep all profits

  -Simple tax arrangements
• Limitations of a Sole Trader

  -Unlimited liability

  -Limited access to finance
• Benefits of a Partnership


  -Easy and inexpensive

  -Shared responsibility and decision making

  -More skills and knowledge

  -Increased access to finance and capital
• Limitations of a Partnership

  -Unlimited liability

  -Potential for disputes

  -Profits are shared regardless of contribution

  -Difficult to transfer ownership
• Benefits of a Private Ltd Company


  -Limited liability

  -Access to more finance

  -Easy to transfer ownership

  -Professional image and reputation
• Limitations of a Private Ltd Company


  -Expensive and time-consuming

  -Complex legal requirements and regulations

  -Annual financial reporting and auditing are required

  -Shareholders have little control
• Franchising


  An individual/ franchisee buys the right to operate a business model, branding and support from a larger company in exchange for a lump sum and ongoing fees. Franchises receive training, marketing support and assistance
• Social Enterprise


  A firm that aims to create social or environmental impact and profits are reinvested to further this agenda
• Lifestyle Business


  Small, owner-operated firms that prioritise a specific lifestyle or personal interest over profit eg. yoga or business coaching
• Online Business


  Low overhead costs and can operate from anywhere but still have a legal structure
• Benefits of a PLC

  -Raise capital quickly and cost-effectively

  -Risks are spread among shareholders

  -Shares become more liquid which can increase the firm's value

  -Informed decision-making using a board of directors

  -Increases a firms visibility to customers, suppliers and investors
• Benefits of Franchises


  -Franchisor chooses franchisees to maintain reputation

  -Franchisor decides how much to invest

  -Franchisor provides support, management and training
• Limitations of Franchise

  -Franchisees do not have freedom

  -Must pay a percentage in royalties

  -Will never own the business
• Stock Market Flotation

  Issuing and selling shares to public investors
• Initial Public Offering

  A private company lists its shares on a stock exchange for the public