Business Types - A Level Bridging Course
A sole trader is a person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses.
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.
Sole Trader Advantages : Sole traders are able to make all of the decisions , The business is quick and easy to set up , A sole trader keeps all of the profits , Financial information is kept private .
Sole Trader Disadvantages : Sole traders have unlimited liability , It is harder to raise money to start or grow the business , There is recurrent pressure upon one person , There is no one to cover when the sole trader is ill or takes time off .
Partnership Advantages : Owners may have wider expertise and can share ideas and decision making , Owners share risk , It could be easier to raise finance to establish or grow the business
Partnership Disadvantages : Decisions made by one partner can affect all partners , The partnership no longer exists if one partner leaves , All profits are shared , Partners may disagree
A limited company is a private company whose owners are legally responsible for its debts only to the extent of the money they invested.
LTD Advantages : All owners have limited liability , Customers may trust an LTD more than other types of businesses , An LTD continues to trade even if shareholders change , It could be easier to raise finance to establish or grow the business
LTD Disadvantages : An LTD is more complex to set up than a sole trader or partnership , It is possible that shareholders may disagree , Financial information is published and can be accessed by others , More information must be reported to the government
A public limited company (PLC) is a company that is able to offer its shares to the public. They don't have to offer those shares to the public, but they can.
PLC Advantages :Gives the business a more prestigious profile , The business has an opportunity to raise additional finance through share capital , Shareholders have limited liability , Increased negotiation opportunities with suppliers in terms of prices because larger businesses can achieve economies of scale
PLC Disadvantages: it is expensive to set up, requiring a minimum set up cost of £50,000, there are more complex accounting and reporting requirements, there is a greater risk of a hostile takeover by a rival company as the company cannot control who buys its shares, shareholders will expect to receive a percentage of the profits as dividends, Shareholders may clash when making decisions
Sole Trader Example : electricians, gardeners, plumbers, decorators and plasterers
LTD Example : Burberry , Google
Partnership Example :Doctors, dentists and solicitors are typical examples of professionals who may go into partnership together and can benefit from shared expertise
PLC Example : Tescos , McDonalds
Not-for-profit organizations are types of organizations that do not earn profits for its owners. All of the money earned by or donated to a not-for-profit organization is used in pursuing the organization's objectives and keeping it running
Not for profit Advantages: Can exist long after the founders leave as long as the purpose stays relevant, do not pay taxes so all earnings can be cycled back into the organization to improve it, If there are enough employees it may qualify for group discounts to health or life insurance benefit programs, Research shows that non-profit employees are more motivated
Not for Profit Disadvantages :Takes a lot of time and money to start up , There is continuous maintenance ( e.g submitting annual filings ) , Anyone may request copies of a non profits filings ,No individual or shareholder can receive profit , Can be hard to find willing volunteers , Getting enough funding can be a constant struggle ,
Not for Profit Example :Charities such as Unicef