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Classify the business according to its ownership, and explain the benefits and constraints of this type of ownership.

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Introduction

E1-Classify the business according to its ownership, and explain the benefits and constraints of this type of ownership The business I am going to study is Morrison's plc. Morrisons is supermarket, and caters for the general public through the service they provide, (selling products e.g. food, drink etc.). It has approximately 46,000 employees working in the stores, distribution centres and head office support functions. It originally started off as an egg and butter merchant in Bradford West Yorkshire, but has now grown into a large chain of supermarkets. My nearest store is in Seamer on Dunslow Road, which is labelled in the diagram with an arrow. A sole trader is a business that is owned by one person, and this person has total control of the business. However, if the business goes bankrupt, then the owner's personal assets can be taken as well as the business assets. A partnership is a business that is owned and run by between 2-20 people, and these people have equal control over the business. However, it is the same as a sole trader, with regard to unlimited liability, if the business goes bankrupt the owner's assets can be taken as well as the business assets. A private limited company (ltd) is a company owned by shareholders, however the shares cannot be sold to the general public. ...read more.

Middle

With the sole traders and partnerships', the owners are the company. If Morrisons were to go to court to be sued or to sue someone, then the company name would appear on the court papers and not the owners, because the company is classed as a person. For example, if someone stole products from the store, then it would be Morrisons the company suing the person, and not the owners suing the person. Unlike a sole trader because with a sole trader it would be the owner, suing the person and not the company suing the person. This is good for the firm, because if the company is sued, then it is the firm who is taken to court, and not the shareholders - unlike the sole trader who is the business. Again this will encourage people to lend Morrisons money. There are also other benefits to Morrisons being a plc. Their name is protected by law and prevents anyone else trading under the name. However with a sole trader or partnership people can trade with the same name, which could ruin the reputation of the company. In a partnership, the death of one or more partner will mean the end of the business, as there is no continuity. However in a public limited company the death or change of any shareholders, does not affect the company. ...read more.

Conclusion

The cost of starting a plc is very expensive, and this meant that Morrisons had to make sure it had enough money, to start up a plc and to sell shares on the stock market. There is also a lot of paperwork to fill in when starting up a plc. Compared to a sole trader, which is cheap and easy to set up, with less paperwork to fill in. I think Morrisons should remain a plc because it is easy for them to raise money when they need it, so if they find they are struggling then they can sell more shares and this will help them to get back on the right track. The business has greater continuity so it does not need the original people who started the business up, or the original shareholders to be alive it also means that the business will remain stable despite shares being transferred. They have a legal personality so when the company goes to court, it is the company not the shareholders who is involved. Also people who invest in the company will feel a lot more secure, because if the company goes bankrupt then only the assets belonging to the business can be taken and not assets belonging to all the shareholders. So the shareholders only loose the money they invested in to the business (their shares) and not their belongings, like their car, their house etc. Created by Gareth Haw ...read more.

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