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Different Types Of Organisations and Business Models - Coggle Diagram
Different Types Of Organisations and Business Models
LTD
Disadvantages: Can only sell to certain people meaning it is harder to raise capital, expensive to set up, the directors cant keep all of the profits.
Advantages: Limited liability meaning only the businesses assets and money can be seized not the personal funds of the shareholders limiting risks for the investors, more security as don't have to publish as much information publically.
A private limited company is a company that sells shares to up too 50 share holders in exchange for funds. These shares cannot be sold on the stock market. The shareholders offer or approve the sale of shares to certain individuals.
Sole Trader
Owned by one person but may have one or more employees. It is the most common business set up in the UK. They often provide more specific goods and services than major company's and or normally one-off stores with no large scale production. Their popularity may be due to the low capital needed to set up.
Unlimited liability means that if the company goes bankrupt the owner is financially viable for the debt meaning the owners property can be seized to pay it off, harder to raise money to grow the business, lots of pressure on one person, if the owner is sick then they don't earn money.
Advantages: The owner has full control, the costs are low on start up with limited paper work, the owner keeps all the profit, business affairs are all private meaning competitors won't know how the business works and succeeds, the owner makes all of the decisions.
Not For Profit Organisations
A business that needs to make enough money to cover costs but invests the remaining profit to benefit society or certain parts of it, one type of not for profit is a charity, they mainly rely on donations and government grants. They use this money to support a range of things like animals, people and more. There are also social enterprises who sell products like regular for profit companies, but use the profits too benefit society.
Anyone on the board of the charity cannot be paid unless allowed by charity commission, they are unable to raise investment equity through selling shares.
Charities pay reduced tax, recognised for being socially good which may help with fundraising, don't have to pay VAT on certain goods and services, gift aid means donations can be increased by 25% for no extra cost to the donator.
Partnerships
Where to or more people (normally up to 20) go into business together. This is done through a deed of partnership, The deed contains how much capital is going to be invested in by each partner, how profits and losses should be divided, how much each partner has a say in decisions which is often based on the initial investment, how if new partners were going to be introduced that would be done and how a partner would leave or partnership would end.
Disadvantages: Have to share profits, less individual control, may dispute with the other partners, unlimited liability meaning the owners are liable for any debt.
Advantages: The debt is shared between all of the partners so their is less risk, partners have different expertise so it is easier to make the business more profitable and attractive, relatively cheap to set up.
PLC
A PLC or public limited company is a company that raises capital through selling shares on the stock market (available to the general public). They need at least two shareholders, the laws appear to be more strict than those of a private limited company within six months of the years end and the Company Secretary must be a qualified person.
Disadvantages: Complex accounting and reporting procedures. Directors are reliable for all of the shareholders, of which there are likely to be many of due to the shares being sold on the stock market. greater scrutiny of the companies financial performance.
Advantages: Relatively easy access to capital through existing and new investors. Limited liability meaning more security in hard times. Liquidity which allows the shareholders to buy and sell shares on the stock market. The company has a more prestigious profile. Greater public awareness for the business.