Business Ownership

Sole Trader

Owned by one person- may employ several people

Advantages

• no complicated paper work to set up
• decisions can be made quickly
• close contact kept with customers/employees
• all profits kept

Disadvantages

• decisions made on your own
• working long hours
• provide all finance yourself
• unlimited liability

- Sole trader could be held personally liable or all debts- could lead to selling personal assets.

Partnership

Between 2-20 partners - however there are exceptions for large firms

Advantages

• the sharing of skills and workload
• may be easier to raise capital needed
• finances of costs needed can be split between partners

Disadvantages

• conflict between partners
• organising deeds of partnerships
• unlimited liability
• partnerships can rarely borrow or raise large sums of capital
• business decisions may be harder/slower to make
• profits shared

Private Limited Comany

Must have at least two+ shareholders (no maximum). Shares cannot be traded on stock market

Advantages

• possible to raise money through selling shares
• limited liability
• capital easier to raise - loans available from banks
• registers the name/business - prevents anyone else using the same name

Disadvantages

• have to share profits with shareholders
• cannot make decisions quickly
• extensive paperwork to set up
• cost more to set up

Public Limited Company

Shares bought and sold on the Stock Exchange

Advantages

• large amounts of capital can be raised very quickly
• greater borrowing power
• limited liability
• board of directors with expertise can be appointed
• shareholders can sell/transfer their shares freely

Disadvantages

• loss of overall ownership
• loss of control
• decisions take longer to make
• profits are shared among large range of shareholders
• published accounts have to be prepared
• a lot of paper work

Co-operatives

People join to together to make the decisions, work and share profits

Advantages

• generally more stable
• caring employees- because everyone is getting a share of the profits
• build good relationship with community and employees
• savings in management expenses

Disadvantages

• often find it difficult to raise capital
• often a lack of sales promotion
• possibility of conflict between members
• longer decision making process
• extensive record keeping necessary
• participation of members is required for success

Franchise

Taking on the name of an established business but the owner of business is the store manager.

Avantages

• business is based on a "proven idea"- it is established already= low risk
• receive support and advise from franchisors/branded business
• relationships with buyers/customers has already been established

Disadvantages

• costs can be high depending on the business
• franchise agreement can normally include restrictions on how to run the business
• other franchisees may give the brand a bad name
• profits are shared with franchisor