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Advantages and disadvantages of different business types - Coggle Diagram
Advantages and disadvantages of different business types
Partnerships
Advantages
Simplest way for two or more people to start a business
Minimal paperwork once partnership agreement is set up
Business benefits for having the expertise and efforts of more than one owner
Partners can provide specialist skills
Greater potential to raise finance
Disadvantages
Unlimited liability
Poor decisions from one partner damages the interests of the other partners
Harder to raise finance that a company
Partners are bound to honour decisions of others
Complicated to sell or close
Examples: John lewis, doctors, dentists, solicitors
Definition: A partnership is a form of business where two or more people share ownership, as well as the responsibility for managing the company and the income or losses the business generates
Public sector (not for profit organisations)
Advantages
Provides some of its services to all consumers
Faces little competition
Provides goods and services for those members of the community who cannot afford them
Provides services that could be unprofitable if provided by firms in the private sector
Disadvantages
Often considered to be bureaucratic
As there's no profit motive, there's often a lack of innovation
A change of government is likely to mean changes in priorities and so changes in funding and spending
Can often 'crowd out' private firms
Examples: Schools, libraries, emergency services, Postal service, social services
Definition: The Public Sector is usually comprised of organisations that are owned and operated by the government and exist to provide services for its citizens.
LTD
Advantages
Owners have limited liability
Customers may trust a 'Ltd' more than other types
Continues to trade even if the shareholders change
Could be easier to raise finance to establish or grow the business
Disadvantages
More complex to set up than a sole trader or partnership
Shareholders may disagree
Financial information is publish and can be accessed by others
Examples: Both my parents businesses, Kelloggs,Facebook, IKEA
Definition: A private limited company, or LTD, is a type of privately held small business entity, in which owner liability is limited to their shares, the firm is limited to having 50 or fewer shareholders, and shares are prohibited from being publicly traded
Sole trader
Advantages
You have full control over daily and strategic decision making
You have no staff to manage or pay.
Starting your business is quick and easy.
All financial data is kept private.
Fast Decision making
Minimal paperwork
Disadvantages
You have full personal liability for any debts (unlimited liability)
There's no staff to delegate to if you have an accident or fall ill
You have to buy-in knowledge and expertise if you don't have it yourself
Harder to raise finance
Can pay a higher tax rate than a company
Examples: Gardeners, electrician, plumber, decorator
Definition: A sole trader is a self-employed person who owns and runs their own business as an individua
PLC
Examples: Aviva, Marks & Spencer, Boots
Disadvantages
More complex accounting and reporting procedures
Risk of potential takeovers
Increased public and media attention
Less privacy around financial performance
Greater influence on decision making by external shareholders
Advantages
Ability to raise finance through share capital
Limited liability
Considered more prestigious and reliable
May be able to negotiate better prices with suppliers
Definition: A company whose securities are traded on a stock exchange and can be bought and sold by anyone. Public companies are strictly regulated, and are required by law to publish their complete and true financial position so that investors can determine the true worth of its stock (shares)