Advantages of being a sole trader
Being a sole trader has advantages but also disadvantages the biggest advantages are; they are usually small businesses, so less money is required to set them up. I am not saying that being a small business is a good thing because it is not. It is good because it is cheap and easy to set up but not good as it is not like a big company earning millions. The owner is individually in charge so quick decisions can be made without having to consult others. The owner gets to keep all of the profits; they don't have to be shared with others. Financial information can be kept private. The needs of local people can be catered for as can special tastes as the owner will know the local market.
Disadvantages of being a sole trader
If the owner becomes ill or goes on holiday the business may suffer as they are in sole charge. This can be less of a problem if the sole trader employs a manager or managers. How often the sole trader is prepared to leave the manager in charge will depend upon how much the owner trusts him/her. Another disadvantage is that many sole traders work very long hours, as they may be the only ones who work for the business. It may be the case that they are motivated to work long hours because they are working for themselves and they will get the extra profits from their extra work. Money can be difficult to raise as many banks and other lending institutions might be reluctant to lend to sole traders because they have a higher rate of bankruptcy so this may be a big disadvantage. Their prices are often higher than those of larger organisations so this will be a big disadvantage as they may not get as much customers. This is because sole traders tend to be small and are unable to buy materials in bulk and benefit from the lower prices this offers. Sole traders often join voluntary groups (such as Spar, VG, Mace and Londis) in order to be able to buy in bulk. The biggest disadvantage for the sole trader is that s/he has complete responsibility for all the debts of the business. This is called unlimited liability. This means the owners might lose all of their personal possessions if they cannot pay the debts of the business, for example, if it goes bankrupt.
Advantages of a Partnership
Setting up a partnership is relatively easy. All that is required is for the people concerned to agree to share the decisions within a business, or start to work together as joint owners of a business. If this happens, they are automatically considered to be partners and will share both the responsibility and profit. As there is more than one owner, there will be more money available to help set up the business. New partners can bring in new skills and experience that may help the business to make more profit. You can share out the responsibilities between the partners. This means that no single person is responsible for running all of the business. If the business experiences financial difficulties there will be other people to share the costs with you. This reduces the risk of losing money. Expanding the business can be made easier as new partners can be introduced. They may put money into the partnership which could be used for buying new, or updating existing, machinery. Some financial details can be kept private from others, as you don’t have to publish your accounts - many people do not like others to know how much they earn.
Disadvantages of a Partnership
The profits have to be shared among all the partners so there will be less money for you. You do not have as much control over the business as there are a number of owners so this can be a big disadvantage. All of the partners will want to have a say in important decisions and this may lead to some of them being overruled. Deeds of partnership have to be rewritten if a partner leaves or dies which can take a lot of time and cost money. There can be disagreements between the partners. This can cause major difficulties as partners are bound by any commitments made by a single partner, even if they did not agree to it. The partners have unlimited liability so they could lose all of their personal possessions if the business goes bankrupt (this is not true for sleeping partners as they have limited liability).
Advantages of a Public Limited Company
The shareholders have limited liability this means (in a nutshell) that an investor cannot lose more money than the amount that was invested as there liability is limited. A company can raise additional capital by issuing more shares or debentures. Also being a public limited company the shareholders or owners have greater borrowing power, this meaning they have greater a greater advantage when borrowing money, a board of directors with expertise/experience can be appointed, Shareholders can sell/transfer their shares freely.
Disadvantages of a Public Limited Company
The disadvantages of a public limited company are that there is a loss of overall ownership and control of the business. Decisions take longer as there will be lots of people with authority over the business these being the shareholders/owners and there may be disagreement. Significant expenses are incurred when setting up a company. There are more statutory regulations to conform to. Profits are shared amongst a far greater number of people. Public disclosure of the financial affairs is necessary and published accounts have to be prepared as the information will have to be known to the public (probably via the LSE, the London stock exchange).
Differences between a Public Limited Company and a Partnership
A plc offers shares to the general public but a partnership does not, basically shares cannot be bought from the stock market if the ownership is a partnership. The owners of the plc have limited liability but in a partnership the owners have unlimited liabilities so they will have to pay out of there own personal money and possessions to pay for debts if the business goes bust. In a plc, profits are shared amongst a greater number of people than in a partnership so a partnership has the bigger hand in this case. A plc can be listed on the stock exchange but a partnership cannot. The shareholders of a plc can sell their shares freely but the owners of a partnership may be prevented from doing this by the Partnership Agreement. A plc is controlled by a Board of Directors on behalf of the shareholders, whereas the partners have direct control in a partnership. More statutory regulations are required for a plc than in a partnership. Public disclosure of its financial affairs is required of a plc but this is not necessary for a partnership.
The type of ownership Shakey’s will be is a private limited company. It will be run be one person (a sole trader). I choose to be a sole trader as all the decisions in the business will be made by me, all the profits will go to me and it’s easier and cheaper to set up. I would have chosen to be a partnership but I cannot risk relying on another/other person/people. I think being a sole trader is the best option for Shakey’s as it is going to start up as a small business, I may consider becoming in a partnership as my business grows.
Stakeholders
Stakeholders are those groups and organizations having an interest or stake in a organization, Business, company etc. (e.g. regulators, shareholders, customers, suppliers, special interest groups, residents, competitors, investors, bankers, media, lawyers, geologists, insurance companies, trade groups, unions, ecosystems and cultural heritage).
Stakeholders are important because everyone to do with the business is a stakeholder, so without a stakeholder there is no business. Each stakeholder has an important role in a business.
Suppliers are important to a business as they supply a business with their goods or services, but say if a business upsets their suppliers (for instance if the business doesn’t pay remaining debts) this would not be good for the business as they will need to get their supplies to run the business.
