Forms of Business Ownership

• Sole Trader - someone who owns and runs their business by themselves. Ex) carpenter

  Advantages:

  • Very easy to form
  • Costs are low
  • All profits go to sole trader
  • Decisions are made quick

  Disadvantages:

  • Unlimited Liability
  • Higher prices for buyers
  • Sole trader must provide all finance
  • Difficult to compete against larger businesses
• Partnership - when 2 to 20 people carry on a business to make profit. Has unlimited liability. Often formed by dentists and accountants

  Advantages:

  • Larger finance because of more people
  • Wider range of skills
  • A group makes better decisions
  • Easy to form

  Disadvantages:

  • Unlimited Liability
  • Disagreements easily form
  • Profits must be divided among everyone
• Private Limited Company (PLC) - when 1 to 149 people start a business with limited liability. People investing money are shareholders, and they get to have a say in the decisions of the business by how much stock they invested in. PLC companies end in Ltd or Limited.

  Advantages:

  • Limited Liability
  • More finance
  • Wider range of skills

  Disadvantages:

  • More difficult and expensive to set up
  • Views and ideas of shareholders must be considered
  • Many rules must be followed
• Franchise - an arrangement where a person (franchisee) is given permission by the owner (franchiser) to set up a branch of the owners business.

  Advantages:

  • Less risk, the business is already established
  • The business benefits from group advertising
  • Stock can be bought in bulk, reducing costs

  Disadvantages:

  • Franchisee must pay a fee and a percentage of profits toward the franchiser
  • Franchisee does not have total control over the business
  • Restricts the entrepreneurship and intrapreneurship of people
  • When one franchise branch gets a bad name, the other branches also get the bad name
• Co-operative - organisation formed by people with a common interest to achieve a specific goal. It is run for the benefit of all members, not just a small group of people. Usually identified with 'Society' in their name. Has limited liability and there must be at least 7 members.

  Advantages:

  • Profits are divided among members, in proportion to contributions
  • Limited Liability

  Disadvantages:

  • Difficult to compete with other businesses