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Forms of Business - Coggle Diagram
Forms of Business
PUBLIC (PLC)
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.
The minimum number of shareholders must be two (a private limited company only needs one shareholder). Accounts must be filed within 6 months of the year end (the limit is 9 months for a private company) The minimum number of Directors is two (just one needed for a private company)
Benifits; Better access to capital , Liquidity – shareholders are able to buy and sell their shares
Drawbacks; Financial markets will govern the value of the company through the trading of the company's shares, and will represent the market's view of the company's performance over time. Greater public scrutiny of the company's financial performance and actions
SOLE TRADER
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A sole trader is a person who starts and runs a business without turning it into a company, therefore the law sees the business and the owner as the same. As a result the owner is LIABLE for any debts running the business and risks their personal assets being taken away.
The benefits; owner has full control over decisions, keeps all profits made and their is minimal start up paperwork.
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OTHER FORMS OF BUSINESS
SEPERATE TO THE LEGAL STATUS OF A BUSINESS AND CONCERNED WITH THE LISCENSING OF A BRAND NAME AND RUNNING A BUSINESS.
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Lifestyle business; some entrepreneurs start up a business that suits their lifestyle, encouraging passion, flexibility and a work-life balance.
Online Business; setting up a online business can help entreprenuers gain higher potential revenues with the scope to sell worldwide and can lower costs as there is no need to spend on physical premises.
PARTNERSHIP
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A partnership is 2-20 owners who run a business, however its not seen as a company yet. This helps to raise finance and bring capital into the business. it also helps reduce the responsibility and shares it along with skills and experience. However they still have liability for debts incurred running the business.
Key benefits: more owners can allow for more finance to be raised, partners bring skills and experience, responsibility is shared.
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FRANCHISING
Franchising is where the owner of a business system (the franchisor) grants to an individual or group of individuals (the franchisee) the right to run a business selling a product or providing a service using the franchisor's business system.
Benefits; support from franchisor, national advertising from the franchisor, easier access to loans, cheaper and easier way of expansion.
Drawbacks; may be unable to make decisions as it may be dictated by the franchisor. initial franchise fee and the franchisor will expect royalties ( a percentage of revenue )
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LIABILITY = refers to the extent at which the owner(s) of the business must repay debts incurred in running the business.
LIMITED LIABILITY = a form of legal protection for business owners which ensures that owners of a limited company can only lose the money they have invested in the business.
UNLIMITED LIABILITY = means that the owners of the business must take personal responsibility for covering debts run up by their business. If the business goes bust, the owner can be forced to sell their own personal assets.