Being a Partnership there is more than one person to make a decision, and problems can be shared. Partners can share skills, letting them specialise in different areas and sharing skills.
Raising capital is hard when you’re a sole trader, but when being a partnership, it makes it a lot easier as others can contribute.
Profit made by the business can either be invested back into the business if all the partners agree. Or they can split it between them and personally keep it.
In a partnership the control can vary. They could either split the decision and all agree or they could each specialise in different areas, and control their part.
Disadvantages in being a partnership can be the partners may disagree, causing conflicts. Others could work harder than others making it unfair.
Profits would equally have to be shared. No decisions can be final unless all partners fully agree.
Actions/Mistakes made by one partner will have effect on all. Partnerships are also unlimited liability, which means if they were in debt, they can all loose personal belongings.
Private Limited Company’s
Private limited companies are mainly known as an LTD. LTD’s are usually small family businesses, at least 2 shareholders, but there is no maximum. An example of an LTD is Heatherton.
The family, group or shareholders own the business, the directors control the business. There can be a minimum of one shareholder and one director. The directors are usually the shareholders, which makes the business smaller.
To become an LTD it is easy and inexpensive to set up. Any profit
made can be put back into the business or given to shareholders.
Owners have limited liability for dept. This means if they were on dept, the most they could loose is the amount of money they invested into the business. Their personal belongings wouldn’t be at risk.
Being an LTD, you are usually trusted by the general public than a sole trader or partnership.
Typical Objectives for an LTD is to make profit, expand and to sell shares.
Disadvantages in being an LTD is you cannot sell shares to the general public, only to your family/group.
Being an LTD you have more agreements and regulations to agree with. If the LTD goes into debt, the company goes into liquidation.
Public Limited Company
Public limited company is known as PLC. A PLC are very large companies. An example of a PLC is Tesco.
Capital made by the company is made by making a profit and mainly selling shares on the stock exchange. A PLC can sell shares to the general public unlike an LTD.
To become a PLC the company must have more than £50,000 and must have a satisfactory financial track record. Also there must be a number of people interested in buying shares for it, to have a successful flotation.
A PLC must have a minimum of two directors and two shareholders. The directors control the business and the shareholders own the business.
A money saving advantage in being a PLC is that because they are so big, they can order products from the supplier cheaper as they can buy in bulk. If the company is successful, the share values increase making the company worth more.
Disadvantages in being a PLC are there are many agreements and regulations to deal with. If the business is doing badly, it reflects on the value of shares, showing the public the business isn’t doing too well.
Every year there is an annual general meeting that must be held each year at which stakeholders can discuss and raise their concerns, which wastes a lot of time and money. The original owner may loose overall control of his business which it becomes a PLC as someone would only have to purchase 51% of the shares and they will have full control.
Franchises
A Franchise is a larger company that allows small operators to trade on name in return for fee and share of profits. The worlds leading franchise is ‘McDonalds’. In America, over 40% of all retail sales are made through firms operating under the franchise system. It is a form of a business organisation that is becoming very popular in the UK.
The Franchisee can have some control, but the main control is the company as they can have strict rules. Profit made by the franchisee is split between the franchisee and the franchiser. This is because the franchisee is using the franchisers name, and has to pay for using it. The Franchiser makes money from selling the use of their name to the franchisee, and gets a share of profits. But the franchisee makes money from sales. A franchise’s typical objectives are to expand and make profit.
The advantages of being a Franchise is its less risk in starting your own business because the brand is already well known, and you have the financial support of the main business. You will always have Advice, guidance and expertise given by the franchisor so fewer decisions to make. The Owner retains most of the profit. Reputable franchisors do not allow competition within a specified area.
The Disadvantages in being a franchise is the profit made by the franchisee has to be split up with the franchisor. The Franchisor can’t make much of their own decisions, because they have to keep to the franchisors rules. Only the Franchisor products can be sold. If the main franchisor fails, then the franchisee will also suffer.
Non-Profitable Businesses
Non-Profitable businesses mean what they are. They don’t make a profit. If they do, they put it back into the business. Many charity based business organisations are run as ‘not for profit’ operations. They typically receive donations or funs from groups or government.
These can either be big or small businesses. They usually care for the environment e.g. Red Cross. The ownership of the business is a trust. The idea of this type of business is to raise money.
Their typical objectives are fund raising, break even and help the community. This type of business employs voluntary employees.
Co-Operatives
Co-operatives are companies that are owned by a group of people (members) who have shares in the company. Shares can start as little as £1 and each member has a share in the Co-operative. It is the members (shareholders) who finance the co-operative and they control on how the business and profits are run. They may have limited liability.
Tesco being a PLC
Tesco is a PLC. The reason is, is because it is a massive nationwide business who sell shares on the stock market to gain profits. In June 04, Tesco is giving more than 160,000 of its workers company shares worth £63m. Tesco chief executive Sir Terry Leahy said the giveaway was a “thank you” gift for employees.
Here is a copy of the current Tesco Share Values:
This is showing the share Prices have slightly dropped.
