- It may cover the following:
- Arrangements for sharing of profits
- Liabilities in case of debt
- Resignation of a member and etc.
In a partnership there must be at least one general partner who is fully liable for all debts and obligations of the practice.
Many partnerships are in professions of doctors, lawyers, and accountants. These professions rarely require large sums of capital to establish their practices therefore meaning they do not need a company to raise finance from investors.
Partnerships tend to operate in local or regional markets.
A company is an association of persons that contributes money to a common stock; employ it in some trader or business. A company has a separate legal identify from its members and can sue in its own name. There are 2 types of companies: public companies and private companies, both, which require a minimum of 2 share holders.
- Private limited companies:
Is mainly aimed for small and medium sized operations. This type of business organisation is particularly suitable for family firms and for small enterprises involving just a handful of people.
Private companies tend to find it easier to attract capital due to investors having the benefit of limited liability and the access to finance making it easy for the business to expand and grow. In some highly specialised circumstances private limited companies may trade internationally. Although it is usual for this type of business to trade regionally and perhaps nationally if required.
- Private limited companies:
- Cannot advertise their shares for sales
- Do not have their share prices quoted on stock exchanges.
- Always end their company name with the word limited.
- May have a single director
- Public limited companies:
The term plc comes from- public limited company. Coming from most of the UK’s famous businesses such as marks & Spencer’s, ICI, BP, Manchester Untied are all public companies with share prices quoted on the London stock exchange are public limited companies. Although not all public limited companies are listed on the stock market, smaller public companies are unable to obtain a full listing on the London stock exchange.
To become a public limited company, a business must have issued share capital of at least £50,000 and the company must receive at least 25% of the nominal value of the shares.
Public limited companies must also:
- Be a company limited by shares.
- Have a Memorandum of Association with a separate clause stating that it is a public company.
- Publish an annual report and balance sheet.
- Ensure that shares are freely transferable that they can be bought and sold.
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The Advantages and Disadvantages of a Public Limited Company:
- Can gain positive publicity as a result of trading on the stock exchange.
- Stock exchange quotation offers access to large amounts of capital.
- Stock exchange rules are strict.
- Suppliers will be more willing to offer credit to public companies.
- A stock exchange listing mean emphasis is placed on short-term financial results not long-term performance.
- Public Limited companies are required to publish a great deal of financial information.
- Trading PLC can result in hefty administrative expenses.
A public limited company has its shares bought and sold on the Stock Exchange. Companies like next have to go to the expense of having a ‘full quotation’ on the Stock Exchange so their share prices appear on the dealers’ visual display screens.
The main advantage of selling shares through the Stock Exchange for any company that uses a franchise operation; this means that it could be a sole trader, partnership or public Limited Company, that large amounts of capital can be raised very quickly. One disadvantage is that the control of the business can be lost by the original shareholders if large quantities of shares are purchased as part of a ‘take-over bid. It is also costly to have shares quoted on the Stock Exchange.
To create a public company, the directors must apply to the Stock Exchange Council, which will carefully check the accounts. A business wanting to ‘go public’ will then arrange for one of the merchant banks to handle the paperwork. Selling new shares is quite a risky business. The Stock Exchange has ‘good days’ (when a great many people want to buy shares) and ‘bad days’ (when a great many people want to sell). If the issue of new shares coincides with a bad day, a company can find itself in difficulties.
For example, if it hopes to sell a million new shares at £1 each and all goes well, it will raise £1 million; but on a bad day it might be able to sell only half its shares at this price. There is quite a deal of luck involved, therefore, in getting the day just right to launch new shares because the date has to be chosen well in advance. Some companies are very unlucky, launching their shares on a day when people are gloomy about prospects in the economy.
One way around this problem is to arrange a placing’ with a merchant bank. The merchant bank recommends the company’s shares to some of the share-buying institutions with which it deals (pension funds and insurance companies, for example), who may then agree to buy, say,
one-tenth of the new shares. In this way the merchant bank makes sure the shares are placed with large investors before the actual date of issue comes round. Then, even if it is a bad day on the Stock Exchange when the shares are issued, the company’s money is secure.
Another common method by which public companies raise share capital is by offering new shares for sale to the general public. The company’s shares are advertised in leading newspapers and the public invited to apply.
When a company is up and running, a cheaper way of selling is to write to existing shareholders inviting them to buy new shares. This is a rights issue.
A stock broking firm acts as an investor’s professional eyes and ears. It is the investor’s link with the stock market and its role is to obtain the best price available for the investor’s shares, whether they are buying or selling. A stockbroker can also deal with all the paperwork involved in transactions in stocks, such as gilt-edged securities and shares, which leave the investor free to concentrate on his or her investment strategy.
Many people find their stockbroker by word of mouth alone (through friends, colleagues or acquaintances who recommend their own stockbroker). There are, however, a number of other ways in which to find a good stockbroker. It is possible to find a list of stockbrokers in Yellow Pages. There is also a national directory of private client stockbrokers issued by the Association of Private Client Investment Managers and Stockbrokers. It starts with an explanation of the main features of the membership, then lists the type of service offered by them, followed by the range of available products.
Contains a diversity of businesses, such as covering agriculture, engineering, retail, wholesales distribution, travel, funeral services, property, and banking.
Essential features of a cooperative society are:
- It is registered under the industrial and provident societies acts. 1965 - 78 and the company’s acts.
- Shares are not transferable, they can only be bought from or not transferable, they can only be bought from or sold to the society.
- Membership is available on the purchase of one share with a nominal value of £1.
- Membership is voluntary and open
- There is equitable use of any surplus or profit
- A limited rate of interest is paid on capital
The Non-profit companies such as the Portsman building society and the standard life assurance society. This organisation has no shareholders and owners. Operate the solely in the interests of their customers (their members). Any surpluses they make are ploughed back into the business or paid to the organisation members.
Is not a form of business organisation as such, but it is a way of managing and growing a business, franchising covers a variety of arrangements under which the owner of a business idea grants other individuals or groups to trade using that name or idea. Although we must consider the fact that a franchise can trade as a sole trader, a partnership or a private limited company.
The person or organisation selling the idea gains a number of advantages from the process of franchising. The franchiser gains initial capital payments, in McDonald’s case; it can be hundreds of thousands of pounds.
McDonald’s is the most known of brand franchising. McDonald’s, the franchisor, ‘sells’ the right to sell its branded goods to someone wishing to set up a McDonald’s franchise. The licence agreement allows McDonald’s to insist on manufacturing or operating methods and the quality of the product. Under a McDonald’s franchise, McDonald’s own or lease the site and the actual restaurant building. The franchisee buys the fittings, the equipment and the right to operate the franchise for 20 years. To ensure uniformity throughout the world, all franchisees have to use standardised McDonald’s branding, menus, design layouts and administration systems.
Interview your local McDonald’s manager to find out what are the benefits and drawbacks of operating the franchise outlined above.
The classifications of McDonalds are that they want to make the company successful as possible. Making it the leading brand nationally.
The benefits of McDonalds is that it provides a service of food and drink to the public, meaning that it is also satisfying customers whilst making a living profit itself. It also is a good well-known company meaning it is successful with its community. It is vitally important that you keep it nice with your local community, as if you do not then these will mean that you r profits towards the business will go down as all your customers tend to be the local ones.
The constraints of McDonalds are that sometimes it may not reach to the expectations that it should. What I generally mean by this is that the food has to be up to a certain standard of top quality and if it does not reach or obtain to this level then it must not be given to customers and must be done all again basically if you do not do anything properly or to a certain level that it must be done again.
