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Types of Business Organization - Coggle Diagram
Types of Business Organization
Unincorporated Business
sole traders
Advantages
make all decisions
keep all the profit
small capital
easier to set up
Disadvantages
only gain money while working- longer working hours
no holiday pay
no continuity
unlimited liability
difficult to raise finance
partnerships
Disadvantages
Lack of capital
Shared profit
Unlimited liability
Conflict of interest
Advantages
More expertise
Less financial risk
More capital
More continuity
Can attract investment
People usually rather run these small businesses because they keep the profit themselves and the paperwork is less and easier. There is no number of maximum partnerships.
Deed of Partnership
Legal pact signed by all the partners
Helps when there is a disagreement between them
Must include:
Finance provided
Salary entitlements
Percentage of profit received
Holiday entitlements
Registered address
The owners and
the businesses
have the same entity
Incorporated Business
Private Limited Company
Advantages
Shares
More expertise
Maintain control
Limited liability
Disadvantages
Realising financial information
Legal restrinctions
Public Limited Company
Advantages
Selling shares to the general public
Limited liability
Managerial economies of scale
Disadvantages
Realising financial information
Dividends
Losing control
Legal issues
have separated legal identities to the owners.
Limited liability
Franchises
arrenchment between two existing organizations
usually public or private limited companies
Participants
Usually new incorporated business (franchasee) that trades under the name of an existing company (Franchisor)
Franchasee
Advantages
Easier finance
No need to build customer base
Stock control
Able to offer established products
Disadvantages
Limited freedom to make desitions
Adapting to prices and products offered
Franchisor
Advantages
Much faster and cheaper growing
Less time spend on day-to-day issues
Yearly royaltees recieve
Disadvanatages
Can risk losing reputation
Franchasee keeps most profit
Joint Ventures
is an agreement between two existing organizations to start a jointly owned third company
Advantages
Capital invest by the two companies
Sharing risk
Double expertise
Disadvantages
Conflict of interests
splited profit
desitions take time