Business Ownership

• sole trader:

  -a business that is owned and run by one person

  (pay income tax)
• sole trader advantages

  -quick and easy to set up

  -have a lot of control over business and its money

  -be own boss and make all business decisions

  -low set-up costs
• sole trader disadvantages

  -unlimited liability

  -long working hours and stressful conditions

  -high level of responsibility for the owner

  -perform many different roles in a business
• partnership:


  -a business that is owned and operated by a group of between 2-20 people

  (pay income tax)
• deed of partnership:

  -specify how profits are allocated

  -percentage each owned + business debts

  -responsibilities and roles
• partnership advantages

  -quick and easy to set up

  -shared decision making

  -shared debt responsibility

  -partners bring more skills/ideas

  -more capital available to invest
• partnership disadvantages

  -unlimited liability

  -long working hours

  -shared profits

  -conflict amongst partners
• private limited company: (ltd)


  -a business that is owned by shareholders; the shares are not available to the general public

  -shareholders have limited liability

  (pay corporation tax - tax on profits of the business)
• shareholders:


  people who own shares in a limited company; each shareholder is a part owner of the business
• ltd advantages

  -limited liability

  -gives individuals opportunities to be their own boss

  -new shareholders must be invited (no outside influence)

  -shares of the business can be sold to raise money
• ltd disadvantages

  -more paperwork

  -others may be able to view the businesses financial information

  -very time consuming to set up

  -may require professional outside help to manage finances

  -shareholders receive percentage of profit (dividends)
• dividends:


  a portion of the after-tax profit that is paid to shareholders according to the number of shares they own
• public limited companies: (plc)

  -a business that is owned by shareholders

  -anyone can buy shares in the business

  -shareholders have limited liability
• plc advantages

  -business can raise finance by share capital (selling shares)

  -limited liability

  -increased negotiation opportunities with prices (able to buy in economies of scale)
• plc disadvantages

  -expensive to set up

  -more complex accounting and reporting requirements

  -greater risk of hostile takeovers by a rival company

  -shareholders receive dividends

  -shareholder conflicts
• not for profit organisations: (nfp)

  -associations, charities, co-operatives or voluntary organisations set up to further non-monetary ideals such as cultural, educational, religious and public service

  -profits/losses are retained/absorbed
• nfp example (1)

  -charity

  -funded by donations

  -have tax-relief

  -eligible for certain types of grants
• nfp example (2)

  -social enterprise

  -aim to help society

  -use profits from selling products to benefit society