Business Studies Task 1 - types of business ownership - Coggle Diagram
Business Studies Task 1 - types of business ownership
the public sector is owned or run on behalf of the public by the government or organisations. they are founded from public funds to provide goods and services for the population, despite this there is still the potential to earn a profit. the public sector is only made up of a small number of companies owned by the government but instead it is composed of many organisations. as mentioned above these are owned and operated by public bodies but are funded by the government, for example, the NHS
faces little competition
provides goods and services to those who cannot afford them
provides services that would be unprofitable in the private sector
employment and better deal to workers
a change in government could mean new priorities so changes in where the money is being spent
there is no profit motive
can 'crowd out' private firms
the government makes decisions so it is not as easy for the public to change something they dislike
the owner can make all the decisions
quick and simple to set up and run
financial information is kept private
the owner keeps all the profits
easy to close/shut down
harder to raise money to start or grow the business
a lot of pressure on one person
no one to cover when a sole trader is ill or takes time off
can pay higher tax than a company
sole traders are the most common business structure and are owned by one individual, however, can employ workers. these workers are employees but do not own any part of the business. the individual that sets up the business owns all assets personally so therefore is responsible for any debts, this means sole traders have unlimited liability. The business can operate under the name of the owner or the name that the owner chooses to use.
sole trade businesses are typically traditional trades that are easy for skilled tradesmen to operate, for example, electricians, hairdressers or decorators. In general they are small scale businesses.
owners share the risk
could be easier to raise finance to establish or grow the business than sole traders because there is more than one person
simple set up
owners may have a specialist skill so together they may have a wider expertise and can share ideas and decision making to get the most successful option
profits are shared
partners may disagree
the partnership no longer exists f one partner leaves
decisions made by one partner can affect all other partners
it s complicated to sell or close
harder to raise finance than a company
a partnership is similar to a sole trader however instead of one person running the business it is 2 or more people. it is similar to a sole trader because it also has unlimited liability so the partners own all the assets and owe all liabilities together. before starting a legal partnership agreement owners will come to a decision on the following factors: how profit will be shared, the amount each partner invests, how the decisions are made and what happens if a partner wants to leave or dies. this insures that there will be no unnecessary disagreements.
partnerships are most commonly professional practices such as accountants and solicitors, however these can also be limited companies. They can also be small businesses just like sole traders.
unincorporated means that the owner is the business and there is no legal difference, so consequently they have unlimited liability. this means that the owners are personally responsible for all debt and liabilities of the business. this adds risk. most unincorporated companies are sole traders but they can also be partnerships.
Public Limited Companies (PLC)
they have the ability to raise finance through share capital
they have limited liability
they are considered more prestigious and reliable
they may be able to negotiate better prices with suppliers
they have greater public awareness so therefore they could grow into a multinational
risk of potential takeovers
increased public and media attention
less privacy around financial performance
greater influence on decision making by external shareholders
more complex accounting and reporting procedures
a PLC is a business that offers and sells shares to the public on a stock exchange. the buyers of these shares have limited liability and are not responsible for any business losses in excess of the amount they invested in their shares. it is also important to note that private limited companies (Ltd) can change into a PLC through stock market flotation.
public limited companies are some of the worlds biggest businesses because they have shareholders from a wide range of locations from around the world. An example could be large banks such as HSBC or Barclays.
Private Limited Companies (LTD)
owners have limited liability
the public may trust limited companies more than other businesses
it is a stable structure because it continues to trade even if shareholders change
could be easier to raise a finance in order to establish or grow the business
more complex to set up than sole traders or partnerships
shareholders may disagree
more information must be reported to the government
financial information is published and can be seen by others, this is mostly a disadvantage because competitors can see how well a business is doing
greater admin costs
directors have legal duties
a private limited company does not publicly trade shares and is limited to a maximum of 50 shareholders unlike a PLC and is the most common form of UK company incorporation. It operates as a distinct legal entity to its directors and shareholders so the company is an individual in its own right. This means that all the business assets, liabilities and profits belong to the company itself and the shareholders are not responsible for debts suffered by the company.
private limited companies are represented by a wide range of different businesses that range in size and trade. however they are typically high profit, large businesses that are widely known around the country. For example private limited companies could be as small as a local garage or as large as motor retailer such as Robinsons automotive services limited. in the retail sector, john lewis is a substantial example of a well known multi branded department store that also a private Ltd.
incorporated companies means that there is a legal difference between owners and the business. because they are separate legal entities they have limited liability meaning that shareholders are not liable for debts and can only lose the amount of money that they personally invested. this shows that it is an important form for shareholders. most commonly incorporated companies are private limited companies, however can include public limited companies.
In the private sector all businesses are operated and owned by private individuals and companies and are often run to earn profit for the business owners.