Understanding Business Structures

1
Understanding Business Structures
2
Types of Business Structure

• Sole Trader
• Partnership
• Limited Companies
• Co-operatives
• Franchises

3
Sole Trader ? Benefits

• Benefits include
• Easy to set up and run
• Only small amount of capital needed
• Owner has total control and doesnt have to share
  profits

4
Sole Trader ? Drawbacks

• Drawbacks include
• Unlimited liability
• Lack of economies of scale
• The business relies on the owner 100

5
Partnership ? Benefits

• Benefits include
• Shared responsibility
• Allowing partners to specialise
• Partners bring in more capital investment
• Decisions, costs are shared

6
Partnerships ? Drawbacks

• Drawbacks include
• Each partner has unlimited liability
• Shared responsibility can lead to disagreements
• Profits have to be shared according to Deed of
  Partnership

7
Limited Companies

• There are two types
• 1. Private Limited Company (Ltd)
• 2. Public Limited Company (Plc)

8
Private Limited Companies

• Benefits include
• Company can raise more capital by selling more
  shares
• Shareholders can keep control of the business

9
Private Limited Companies

• Drawbacks include
• Accounts must be audited
• Limited companies are more difficult to set up
• Shares cannot be sold publicly on the stock
  market

10
Public Limited Companies

• Benefits include
• Easy to raise capital for expansion by selling
  shares on the stock market
• Economies of scale are better than a private Ltd
  company

11
Public Limited Companies

• Drawbacks include
• Expensive to set up (a lot of capital is
  required)
• Annual accounts must be made public
• Anyone can buy shares so its vulnerable to
  takeovers

12
Co-operatives

• There are two types
• 1. Worker Co-operatives
• 2. Consumer Co-operatives

13
Worker Co-operatives

• Are owned by the whole workforce
• Everyone has a say in the business

14
Consumer Co-operatives

• Are local Co-op shops owned by the customers
• The profit is paid out or used to keep prices
  down

15
Franchises

• An existing company (the franchisor) lets someone
  else (the franchisee) use its business idea and
  name
• The franchisee buys a licence to carry out the
  business of the franchisor
• The franchisee must also run the business in the
  same way as the franchisor
• In return, the franchisor helps the franchisee
  set up the business

16

• Overview of business structures
• Understanding business structures
• Focus on sole traders
• Focus on partnerships
• Focus on companies