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Types of business ownerships with advantages and disadvatages

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Introduction

Types of ownerships with advantages and disadvatages There are a variety of options that you could use in setting up in business, each of which has advantages and disadvantages. It is important that you determine which business type is most suitable for you bearing in mind the number of people involved and the objectives of the business. The main types of business are: * Unlimited Companies * Limited company * Partnership * Sole Trader Sole Trader: Sole trading is when a single person owns the business, which is very a familiar type of business in the United Kingdom. Sole trading is used mainly by 'one man bands' although you are able to employ others in your company. A sole trader usually has no formal or legal processes to set up the business. The Inland Revenue and Social Security authorities must be notified when you set up. It is advisable to set up a business bank account. A sole trader operates the business on his or her own. He or she: * controls, manages and owns the business * is personally entitled to all profits * is personally liable for all business taxes and debts. Sole traders are able to use a trading name but all contracts, even though they may be in the name of the business, will in fact be between the sole trader and the other party and property will be held by the sole trader himself. ...read more.

Middle

* Leadership qualities and management experience. * Level of specialist knowledge and expertise. * The level of trust associated with the partner. Advantages: * The main advantage of a partnership over a sole trader is shared responsibility. This allows for specialisation, where one partner's strengths can complement another's. For example, if a hairdresser were in partnership with someone with a business background one could concentrate on providing the salon service, and the other on handling the finances. This can develop the running of the business, as partners can carry out the tasks they do best at. * More people are also contributing capital, which allows for more flexibility in running the business. * There is less pressure of time on individual partners. This means that partners can get time for holidays or even cover illnesses. * There is someone to consult over business decisions. * There are no legal rules and regulations to complete when setting up the business. * Normally this type of business is larger than sole trader which gives partnerships a stronger position to raise money from outside of the company. Disadvantages: * The main disadvantage of a partnership comes from shared responsibility. * Disputes can arise over decisions that have to be made, or about the effort one partner is putting into the firm compared with another. ...read more.

Conclusion

A franchise is a business relationship in which an owner (the franchisor) licenses others (the franchisees) to operate outlets using business concepts, property, trademarks and trade names owned by the franchisor. Franchise relationships are regulated by each state and by the Federal Trade Commission and are often quite complex. A contract known as a franchise agreement should spell out the details of each particular venture. The franchisor often provides the initial capital for the franchise and, in turn, typically takes in a larger share of future profits. In addition, a franchisor usually provides: * A proven business concept * Name recognition * Business know-how * Experience * Advertising support The franchisee provides: * Supplemental capital * The effort to make the business concept work The franchisor and the franchisee both share in the risks and returns of the business, although each agreement is structured differently. Typically, the franchisee is his or her own boss on a daily basis. The franchisor also has a say in the business. For instance, the franchisor is usually responsible for quality control and for maintaining a uniform image among all franchisees. If the quality is not up to par, the franchisor may direct the franchisee to make changes. Advantages: * Training and guidance is available * There may be brand name appeal * Often there is a proven track record * Financial assistance may be available Disadvantages: * Franchise fees * Franchisor maintains a fair amount of control * Promises may not be realized ...read more.

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