Business ownership

BTEC unit 1

Learning objectives

• To describe the different types of business ownership

• To identify 3 advantages and 3 disadvantages for each type of ownership

Owned by one person but can employ workersSmall and local businesses.The owner has to put money in the business him/her self.Simple procedure to start.Decision is made by the owner only.The owner keeps the profit after paying all the costs and tax.The business and the owner exist together.Unlimited liability

Sole trader

Owned by at least two people.The owners share responsibilities and profits.They share their expertise in the business.Decision making is shared as well.People usually draw up a ‘Deep of Partnership’.The owners are personally responsible for any debts.Unlimited liability

Partnership

Owned by shareholders, people who have invested in the company.Usually have ‘Ltd’ at the end of their name.The company needs to be registered with the Companies House.A number of paperwork needs to be set up.They have to publish their accounts every year.Shareholders get dividend if the business has made a profit.Limited liability

Private limited company

Owned by shareholders, people who have invested in the company.Usually have ‘plc’ at the end of their name.Similar to private limited company, however, plc’s can trade their shares publicly on Stock Exchange.Higher amount of capital required before companies can become plc’s.Anyone can buy shares from a plc.Limited liability

Public limited company

It is like a contractual agreement between the Franchisor (people who own the brand name) and the Franchisee (people who use this established brand name).A fee is charged by the brand owner trading under their big names.The franchisee has to pay some of their profit to the franchisor.Training and advertising is provided by the franchisor.

Franchise

Workers’ cooperatives

• The business is jointly owned and run by the workers.

• All the profits are shared and the owners make joint decisions.

• They are normally much smaller than Consumers’ cooperatives.

What have you learnt today?

True or False?

• A sole trader has to work on their own therefore cannot employ anyone.

• It can be difficult for a sole trader to raise money to finance the business.

• Sole traders have unlimited liability for the debts of the business.

• Partnerships are better than sole traders in every aspect.

True or False?

• Both private limited companies and public limited companies can trade their shares on a stock exchange.

• Shareholders are only liable for the amount they have put into the business.

• The accounts of limited companies are available for everyone to see at Companies House.

• It is harder for limited companies to raise money compared with sole traders and partnerships.

True or False?

• Franchisors receive training and support from the franchisee.

• The franchisee agrees to buy all of its supplies from the franchisor and the latter makes a profit on these supplies.