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Types of business organisation - Coggle Diagram
Types of business organisation
Unincorporated business
Partnership
DISADVANTAGES
Lack of capital
Unlimited liability - All partners are responsible for debts
Conflict of interest - Partners decisions might differ
Sharing the profit earned with partners
Small organisations where the owners (partners) and the business are seen as the same legal entity
ADVANTAGES
More expertise - There are more owners
Less financial risk - All the liability (responsibility) is shared with all owners
More access to capital - There are more people to invest money
Can attract investment
They have more continuity - More people to continue the business
Sole trader
Individuals who own their own business
ADVANTAGES
Keep all of the profit for themselves
Small work is required to set it up
Requires little capital to start the business.
They make the business decisions for themselves
DISADVANTAGES
Unlimited liability (financial responsibility) for all the business debts
Difficult to raise finance/earn income
Long working hours
No holidays or paid time off (they only earn money when they work)
No continuity (if the owner stops, the business stops)
Are not legally registered as companies. The business and the owner are seen as the same legal identity. They both are liable for the business´s debts.
Incorporated businesses
Public limited company
ADVANTAGES
Limited liability - Limits the risk involved with a potential investment
Managerial economies of scale - Improves the efficiency of the company
Selling shares to the general public - This allows to raise considerable amounts of capital.
DISADVANTAGES
Releasing financial information - All the information can be accessed really easily by reports.
Dividends - The right balance between retaining enough profit to reinvest and satisfying shareholders.
Losing control - Hostile takeover bids, and lose control of the business.
Legal issues - More legal constraints than a private limited company.
Companies where shares are issued to the general public, in other words, anybody can be a shareholder.
Franchise
DISADVANTAGES
Limit the entrepreneur's freedom of making decisions on how the company operates.
Decisions on pricing and products offered are made by the franchisor, which sometimes doesn’t suit the local market's conditions.
Arrangement between two existing organisations.
ADVANTAGES
Much easier to obtain finance
No need to spend heavily on advertising
Business is more efficient since it has stock control and the accounting system is often provided by the franchisor.
Offer established products reducing risks of failure
Private limited company
ADVANTAGES
Shares - They can select shareholders to help them raise more capital.
More expertise
Limited liability - shareholders are protected by this.
Maintaining control - they choose the shareholders they want
DISADVANTAGES
Realising financial information.
More legal restrictions
Companies where shares are issued to private investors they choose. The ownership of the business is kept private.
Public sector organizations.
Public sector organisation are owned and run by the government.
Joint venture
ADVANTAGES
Risks are shared by both organisations.
Expertise can be offered by both organisations.
Capital is invested by both organisations.
DISADVANTAGES
There can be a conflict of interest between the two organisations.
Decisions have to be made by both parties. Slows decision taking.
Profits are split between both organisations.
An agreement between two existing organisations to start a jointly owned third company.
Registered companies that have a separate legal identity from their owners. The company has liability for the debts.
Julieta Gorlero
3°2
Matthew Turman
Julieta Macció