Business Studies Classes of Business Enterprise Hospira Wednesday 8th Feb

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Business StudiesClasses of Business
EnterpriseHospiraWednesday 8th Feb
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Classes of Business Enterprise

• Sole Traders
• Partnerships
• Limited Companies
• Co-operatives

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Sole Trader

• This is a business owned controlled by a single
  person. Many businesses begin this way, and it
  is most favoured by the owners of small retail
  units. i.e. farmers, publicans, and service
  firms.
• Characteristics capital is provided by the
  owner for the running setting up of the
  business. The capital may be borrowed from
  friends, family, or a bank. The owner has direct
  and personal control over the business
• Decisions can be made quickly
• Owner usually works full time in the business
• May be paid employees
• Owner receives all the profits and bears all the
  risks of losses

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Sole Trader

• Formation it is relatively easy to set up.
  There are almost no legal formalities, apart from
  registering with the Registrar of Business Names
  if the name is not the owners name. The business
  must register for PAYE, PRSI and VAT if relevant.
  
• Advantages
• Relations with customers and employees are
  usually good.
• A sole trader is not obliged to disclose
  financial accounts or any information on the
  business except for tax purpose.
• No costly reporting or regulation costs.
• Possible to change business structure in the
  future.

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Sole Trader

• Disadvantages
• Long hours, few holidays and limited leisure time
• If the business fails the owner alone is liable
  for debts. Creditors may seize both business
  personal assets. This is called unlimited
  liability
• Sole traders generally have little capital for
  expansion heavily rely on their own personal
  commitment to make the business successful
• Raising finance can be a problem, banks will need
  to be confident the business will succeed
• The business usually stays small, because of
  problems of working capital cash flow
• What happens if the owner falls ill??

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Sole Trader

• If you know any local sole traders, enquire into
  the advantages disadvantages for them of
  setting up and running their business!!
• Any personal experiences?

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Partnership

• This is an agreement between two or more people
  to go into business with a view to making a
  profit. Membership of the firm can be between 2
  20 exceptions are accountants and solicitors,
  who may have more, while banking partnership is
  limited to 10.
• Formation few legal formalities are required.
  The firm must register its business name if
  different from the partners name. All partners
  should sign a written agreement (deed of
  partnership), which sets out
• How the business should be financed
• The partners salaries
• How profits losses are to be shared
• What happens if a partner decides to leave

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Partnership

• Advantages
• Extra capital is available to finance the
  business
• The partners can specialise, e.g. one partner
  selling the other buying, as they have
  different skills and experience
• Decision making is shared
• Risk and responsibility are shared
• Financial results are not open to public
  inspection

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Partnership

• Disadvantages
• Each partner is personally liable for all debts
  of the business they have unlimited liability,
  like a sole trader
• The partners are responsible not only for their
  own actions but also for those of the other
  partners
• Relationships between partners may become
  strained or clash
• Death, insanity or bankruptcy will result in the
  termination of the partnership
• Profits must be shared

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Private Limited Company

• A private limited company is a firm in which a
  number of people (the shareholders) contribute
  funds to finance the firm in return for shares.
  The min no. of shares is 1 the max is 50. The
  shareholders have limited liability, so they can
  only lose whatever amount they invest.
• Once a company is formed it becomes a separate
  legal entity, distinct from its shareholders.
  The company has the word Limited as the last part
  of its name. Shares cannot be bought and sold on
  the stock exchange.
• The company is managed by a board of directors,
  who are appointed by the shareholders. The AGM
  is where the directors report on the progress to
  the shareholders.

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Private Limited Company

• Advantages
• Limited liability ensures that the personal
  assets of shareholders are safe if the company
  goes into liquidation.
• Obtaining credit from suppliers finance from
  financial institutions (debt capital) is easier
  for a private limited company compared to that of
  a sole trader.
• The company can have up to 50 shareholders who
  can invest money in the company (equity capital)
• The companys profits are subject to much lower
  rates of tax.

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Private Limited Company

• Disadvantages
• More difficult to set up, there are many legal
  regulations to be followed
• Substantial costs are involved in forming a
  private limited company in complying with the
  Companies Act
• As a company is a separate legal entity, the
  freedom to withdraw money is restricted
• By law an annual audit must be carried out.
  Accounts must comply with the Companies Act the
  Auditing and Accounting Standards
• This can be a costly exercise
• An annual return and accounts must be made to the
  Registrar of Companies. Tax returns
  corporation tax must also be paid
• Profits are shared among the shareholder.

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Formation of a Private Limited Company

• Memorandum Articles of Association

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Public Limited Company

• The shares of a public limited company are quoted
  on the stock exchange and are freely
  transferable, so they can be bought and sold by
  members of the public.
• The company must issue a prospectus (A history of
  the company), inviting members of the public to
  subscribe for shares. There must be a min of 7
  shareholders, the max depends on the number of
  shares issued
• The name of the company must end with the
  initials PLC or CTP, and the company cannot start
  trading until it is issued with a trading
  certificate by the Registrar of Companies

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Public Limited Company

• A public limited company must have an audit
  must submit audited financial statements to the
  Registrar of Companies
• An annual return to the ROC containing
• List of the shareholders, particularly of the
  directors and secretary
• The amount of the companies total debts in
  respect of mortgages
• Audited financial statement must be attached to
  the annual return

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Formation of a Public Limited Company

• A private limited company is first formed
• The company must have a min of 7 shareholders, no
  max requirement
• It must raise a min share capital of
• It must submit a statutory declaration to the
  Registrar of Companies relating to the
  authorised share capital, any benefit given to a
  promoter of the company, the amount of share
  capital issued and paid for, expenses incurred in
  setting up the company
• If the registrar is satisfied with the statutory
  declaration, a trading certificate is issued.
• Before a public limited company starts trading it
  must have a certificate of incorporation a
  trading cert issued by the ROC.

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Public Limited Company

• Advantages
• Limited liability for shareholders
• Access to large amounts of capital, as its shares
  are sold on the stock exchange
• Top quality management can be recruited
• Easier to obtain finance from financial
  institutions
• There is a continuity of existence

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Public Limited Company

• Disadvantages
• Expensive to form, company must meet necessary
  requirements
• There are many legal requirements to be followed,
  companies are governed by the various Companies
  Acts
• Annual accounts must be audited published
• The owners/shareholders have little say in the
  running of the business, management will make
  most decisions
• Profits must be distributed among shareholders in
  the form of dividends

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Co-operatives

• A co-operative is a business owned run by a
  group of people, each of whom has a financial
  interest in its success and an equal say in how
  it is managed.
• Co-operatives are registered under the Industrial
  and Provident Societies Act must make annual
  return of their accounts to the Registrar of
  Friendly Societies.
• The Irish Co-operative Organisation Society Ltd
  (ICOS) co-ordinates the activities of
  co-operatives.

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Co-operatives

• Distinctive Features of Co-Operatives
• They are voluntary have open membership, shares
  are not transferable
• Each member has 1 vote, each member holds 1 share
  in the business
• The surplus is distributed among the members in
  proportion to the amount of business they conduct
  with the co-operative
• Formation At least 8 people buy 1 share in the
  co-op. A copy of the rules of the co-operative is
  submitted to the Registrar of Friendly Societies.
  If the rules are in order then a certificate of
  registration is issued

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Co-operatives

• Types of Co-operative
• Producer co-operative here a group of
  producers, e.g. farmers set up a business to
  process market their produce. So milk, beef is
  processed and sold as cheese, cream,
  beef-burgers, etc
• Worker co-operatives this co-op is owned
  controlled by those who work in it. Many worker
  co-operatives are formed due to redundancy the
  difficulty of finding employment. Member put
  together the finance to start a business.
• Credit Unions - Financial co-op owned run by
  their members. The members usually live in the
  same area as the company. They are managed by a
  board of directors elected by members. Any
  surplus is paid in dividends to its members.

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Co-operatives

• Co-operatives becoming Public Limited Companies
• Kerry Group PLC
• Golden Vale PLC
• Reasons?

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Co-operatives

• Advantages
• Members have limited liability
• Each member has an equal say in running the
  business
• There is a great incentive for members to do
  business with the co-operative, as the amount of
  dividends depends on the business transacted
• Producer co-operative provide a market for the
  output of the agricultural fishing industry

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Co-operatives

• Disadvantages
• A lack of finance from the members leads to
  borrowing or to some co-operative converting to
  limited companies to raise additional finance
• Limited return on capital invested by members
• An annual return must be made to the Registrar of
  Friendly Societies

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Franchises

• This is a business which sells a product or
  service under licence.
• Examples??
• Many entrepreneurs start up in business through a
  franchise agreement, which is a licence to sell
  another firms product or service.
• The firm making the franchise available is the
  franchiser, the firm accepting the agreement is
  the franchisee

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Franchises

• As a result of signing the agreement, the
  franchisee acquires the rights to use the name,
  logo, methods of operation, marketing strategy
  product of the franchiser.
• The franchiser provides the following
• Building specifications designs that lay down
  the type of structure the business can operate in
• Management accounting support to help the new
  entrepreneur
• Site recommendations for the location of the new
  business
• Product specifications to ensure all products
  sold are the same

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Franchises

• Benefits
• Tried tested product
• There is little risk involved
• Access to national advertising
• Professional training
• Instant brand recognition
• Branch will benefit from low-cost centralised
  purchasing of stock
• Drawbacks
• Little room for flair
• Initial cost may be expensive need for
  standardisation