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Business Ownership

Extracts from this document...

Introduction

Business Ownership There are several different types of business ownerships. Depending on the type of ownership, the owners have different responsibilities and involvement in a business. One aspect of this is who bares the business risk and whether the owners have limited or unlimited liabilities. Different types of owners are: * Sole trader * Partnerships * Co-operatives * Franchise * Public sector * Company - Private Limited Company - Public Limited Company Sole Trader There are many businesses in the UK which are sole traders. The owner has complete control of the business, and is totally responsible for its success or failure. Running your own is business in extremely hard work because you working on your own. The risks are great, but so are the rewards in job satisfaction. Advantage There are many advantages of a sole trader and the main one is that the owner keeps all the profits. Though the owner must save enough money to pay tax, interest charges on loans and Vat. It is simple and inexpensive to set up as sole traders as start up costs are usually low. However, before starting your own business you must notify the income tax authorise and the department of social security, as you will be taxed and will pay self employed national insurance contributions. The business will be very flexible because if the business is not profitable, the owner has the choice to close. Also the working hours and days worked can be flexible. Disadvantage There are also disadvantages of a sole trader. One example is unlimited liability. This is when owners are personally responsible for all the debts of their business. So this risk of being a sole trader is high because there are chances of failure as there will be competition. The owner will need money when running a business so it will be difficult to raise capital. However the government schemes have made this somewhat easier as they provide grants to help them in their business. ...read more.

Middle

The company's accounts must be audited, so this means it has to employ an auditor as well as an accountant. There are also other legal formalities: for example, a company must hold an annual general meeting and send details of the company's financial affairs to the Companies Registration Office every year. Public Limited Company (PLC) A public limited company is a limited company whose shares can be bought and sold by the public and other firms. A public limited company is different from a private limited company as its shares can be bought and sold by the public. To become a PLC a firm must have a minimum of �50,000 share capital. Most PLC'S have a much bigger share capital totalling millions of pounds. All the shareholders have limited liability over the business. So if the business is going into debt the money invested into the business by its shareholders us used to keep the business running. Advantage The amount of capital for expansion and development is increased rapidly because there are thousands of shareholders. So if the company is successful the value of the shares increases. Therefore this increases the overall value of the company. Additional finance can be raised in several ways. The company can borrow from a range of financial institution, issue additional shares or ask for special loans, called debentures. A PLC has limited liability. So all the shareholders have the protection of limited liability and can lose only the amount they have invested no matter how much money is owed. Limited liability is limiting the financial liability of shareholders to the money they have invested. Disadvantage A public limited company is registered with the Registrar of Companies and must comply with many external regulations. The shareholders expect to receive a dividend in return for their investment and will also want the shares to increase in value. If the company is in difficulties and share values fall, then many shareholders may sell their shares, which will lower the price further. ...read more.

Conclusion

to be made by partners and this will result in disagreement over things and it will result in failure of the business or decrease in profits due to lack of co-operation and other factors like partners leaving the company. If Nokia went into the ownership of Public sector they would have their profit margin reduced enormously as they are funded by government and so they won't have the option of expanding when they want to and introducing new products. Also the biggest factor would be that Public sectors don't aim to make much profit and just like Tesco, Nokia has the same aim as they want the money to invest and expand so this ownership isn't suitable. If Nokia wanted to become a Co-operative business they would be faced with the problem of them not having much control over their business as the people that worked in it would own it and run it, the other major problem is that business market their products and this could ruin Nokia as there products may not be marketed and researched properly and extensively enough for them to be sold. If for instance they became a retail and wholesaler there isn't much profit to be made their either. What Nokia would need is a ownership that is suitable to their business and lets them control the business but also make profit for them and have possible shareholders for a source of finance and so that is why Public Limited Company is very efficient for Nokia to run their business as it suits their needs well and is efficient for them. They could become a Private Limited Company if they wanted however the major downfall to this is that the owner is liable personally for the business and so it is risky a if the business if the business gets into trouble and the owner is left liable it would be very hard for them to try and re gain control of the situation and start up again. ...read more.

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