Forms of Business Organisation 1

8/13/2019 Forms of Business Organisation 1

1/28

Forms of Business organisation (1/3)

Identify and explain the main features of differentforms of business organisation

Describe the main features of sole traders,

partnerships, limited companies, franchises and joint ventures Understand the differences between sole traders

and partnerships Understand the differences between

unincorporated businesses and limitedcompanies


2/28

Roman AbramovichOwner of Chelsea Football Club

In June 2003, hebecame the owner ofthe companies that

control ChelseaFootball Club in theUnited Kingdom.

Born: 24 October 1966Nationality: Russian
http://en.wikipedia.org/wiki/Chelsea_F.C.http://en.wikipedia.org/wiki/Chelsea_F.C.http://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Russianshttp://images.google.co.uk/imgres?imgurl=http://www.sportsbettingreview.co.uk/images/chelsea.jpg&imgrefurl=http://www.sportsbettingreview.co.uk/News/13092009/chelsea-vs-porto-odds-betting-preview-030.html&usg=__7bGGFipzC_ToelZynimOkIWTu4s=&h=320&w=320&sz=38&hl=en&start=1&tbnid=EQj0zxT2OQbJNM:&tbnh=118&tbnw=118&prev=/images?q=chelsea&gbv=2&hl=en&safe=activehttp://en.wikipedia.org/wiki/Russianshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Chelsea_F.C.http://en.wikipedia.org/wiki/Chelsea_F.C.http://en.wikipedia.org/wiki/File:Abramovich_Chukotka.jpg


3/28

Richard BransonOwner of part of all of the

Virgin companiesRichard Branson is the261st richest person

in the world


4/28


5/28

Unincorporated

Sole trader

Partnership


6/28

Sole Proprietor

Business owned by one person Can also be called a sole trader

Usually a very small business


7/28

Try to think of two people who

might be sole proprietors?

(Hint: Plumbers are often soleproprietors)


8/28

Examples of Sole traders

Builders Painters Hairdressers Window cleaners Mechanics Plumbers Etc.


9/28

Advantages of sole traders

Easy and cheap to set up The owner is in complete control of the

business Owner is able to keep all the profit the

business makes


10/28

Disadvantages of sole trader

Unlimited liability Shortage of capital (money)

Illness/holidays Hours of work Shortage of skills Continuity - the business, in its present form,

ceases on the death of the owner


11/28

What is a partner?


12/28

Partnerships

Owned by a minimum

of two and amaximum of 20 people


13/28

Examples of Partnerships

Doctors Dentists Solicitors Accountants Surveyors Etc.
http://images.google.co.uk/imgres?imgurl=http://4.bp.blogspot.com/_j99VUrX25a4/ScmP0uyuRwI/AAAAAAAAEX0/o2sfsio_IH0/s320/surveyor.jpg&imgrefurl=http://lehighvalleyramblings.blogspot.com/2009/03/grucela-surveyors-should-be-able-to.html&usg=__2sOvmKqhH0HJ12ANfvNmRZLGKB0=&h=320&w=320&sz=36&hl=en&start=10&tbnid=iiOTWKO5PYaGRM:&tbnh=118&tbnw=118&prev=/images?q=surveyors&gbv=2&hl=en&safe=activehttp://images.google.co.uk/imgres?imgurl=http://creoleindc.typepad.com/rantings_of_a_creole_prin/images/2009/03/16/dentist.jpg&imgrefurl=http://creoleindc.typepad.com/rantings_of_a_creole_prin/2009/03/dr-dentist.html&usg=__S7_uZ9D5-waM2CYm3ieJTXRpNFk=&h=378&w=450&sz=59&hl=en&start=5&tbnid=vXOlzigghr23IM:&tbnh=107&tbnw=127&prev=/images?q=dentist&gbv=2&hl=en&safe=activehttp://images.google.co.uk/imgres?imgurl=http://www.clipartguide.com/_named_clipart_images/0511-0811-1717-0450_Doctors_Bag_clipart_image.jpg&imgrefurl=http://www.clipartguide.com/_pages/0511-0811-1717-0450.html&usg=__dcaMFCHpLI9ToWmz2e-0N2nFcno=&h=316&w=350&sz=85&hl=en&start=7&tbnid=fOIQkXTGFygOnM:&tbnh=108&tbnw=120&prev=/images?q=doctors+bag&gbv=2&hl=en&safe=active


14/28

Why might partnerships be better thansole traders?

Write down your ideas


15/28

Advantages of the partnership

More capital can be introduced to helpbusiness grow

Each partner may have a different specialistskill

The work of the business can be shared Sleeping partners invest in the business, but

do not work in the business


16/28

Disadvantages of the partnership

Profit has to be shared Disagreements

Shortage of capital Unlimited liability Continuity - the business, in its present form,

ceases on the death of one of the owners


17/28

How do partnerships work outhow profit is shared?


18/28

Deed of partnership

This is a legal document that sets out: Who invested how much capital How the profits are split How to resolve disputes
http://images.google.co.uk/imgres?imgurl=http://www.cartoonstock.com/newscartoons/cartoonists/ena/lowres/enan105l.jpg&imgrefurl=http://www.cartoonstock.com/directory/d/dental_tools.asp&usg=__-EyTdOCjcU617l_klkLRh9-miDY=&h=293&w=400&sz=31&hl=en&start=10&tbnid=4oTvLyWuP7YWsM:&tbnh=91&tbnw=124&prev=/images?q=dentist+tools&gbv=2&hl=en&safe=active


19/28

Activity True or falseStatement True False

A partnership usually has between 2 and 20 partners

The deed of partnership usually states how profitswill be shared amongst the partnersSole proprietors find it easy to borrow money fromthe bankA sole proprietor is owned by more than one person

Partners often use their own savings to set up thebusinessOne disadvantage of a sole-proprietor business is thatit will have unlimited liability
http://images.google.co.uk/imgres?imgurl=http://www.cartoonstock.com/newscartoons/cartoonists/ena/lowres/enan105l.jpg&imgrefurl=http://www.cartoonstock.com/directory/d/dental_tools.asp&usg=__-EyTdOCjcU617l_klkLRh9-miDY=&h=293&w=400&sz=31&hl=en&start=10&tbnid=4oTvLyWuP7YWsM:&tbnh=91&tbnw=124&prev=/images?q=dentist+tools&gbv=2&hl=en&safe=activehttp://images.google.co.uk/imgres?imgurl=http://www.clker.com/cliparts/7/e/2/e/1195421755148157000Andy_-_Tools_Hammer_Spanner.svg.hi.png&imgrefurl=http://www.clker.com/clipart-9232.html&usg=__eO8ucnL6z8Adx2m5tI2ZHOd9Kjo=&h=571&w=600&sz=103&hl=en&start=3&tbnid=AoBP7-XI0Zd4MM:&tbnh=128&tbnw=135&prev=/images?q=spanner&gbv=2&hl=en&safe=active


20/28

Unincorporated businesses ALL have fivefeatures


21/28

Match the pairs

Financial Information

Bankruptcy

Unlimited liability

Continuity

Tax on Profits

Income tax is paid on the profitswhich the business may make

The business, in its present form, ceaseson the death of one of the owners

Remains private to the business

This occurs when the business cant

pay its debts

The owners of the business arepersonally liable for any debts which

the business may have


22/28

Match the pairs - answers

Financial Information

Bankruptcy

Unlimited liability

Continuity

Tax on Profits

Income tax is paid on the profitswhich the business may make

The business, in its present form, ceaseson the death of one of the owners

Remains private to the business

This occurs when the business cant

pay its debts

The owners of the business arepersonally liable for any debts which

the business may have


23/28

Unincorporated business features

Good Bad NeitherUnlimitedliability

Tax onprofitsContinuity

PrivatefinancialinformationBankruptcy


24/28

Public Corporations


25/28

Public Corporations

Owned and controlled by the Government The Corporations get some money from the

Government, but they also make moneythemselves

Any surplus money goes to the Government


26/28

Objectives of Public corporations

May include: To keep prices low so that everybody can

afford the service To keep people in jobs so that unemployment

does not rise To offer a service to the public in all areas of

the country


27/28

Examples of Public Corporations

QTel Qatar oil and Gas

BBC NHS


28/28

Advantages and Disadvantages Companies owned by the

government will ensure thatconsumers are not takenadvantage of by privatelyowned monopolies

If an important business isfailing the government canstep in to nationalise it

Important public servicessuch as TV and radio

broadcasts are often in thepublic sector.

No private shareholders toinsist on high profits andefficiency

Subsidies can lead toinefficiency as managerswill always think that thegovernment will help themout

Often there is no closecompetition

Government can use thesebusinesses for politicalreasons

Documents

Forms of Business Organisation 1