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Business Ownership - Coggle Diagram
Business Ownership
Sole traders
A sole trader is one of the most common types of business form and it is where the owner of the business and the business are the same thing. The sole trader has unlimited liability and is therefore responsible for the business debts. (e.g. Window cleaners or Plumbers)
Advantages :
Operating a business this way leads to it being simple to run due to the owner having complete control over the decision making.
A sole trader business is quick and easy to set up and can always be changed into a limited company later on.
Disadvantages : The business owner has unlimited liability meaning they are responsible for all the debts that the business has. If the business owner is unable to run the business for a duration (possibly due to illness) then the business will suffer due to no one else being able to run it.
Partnerships
A partnership is similar to a sole trader except it is owned and run by two people . And they have a legal agreement called the legal partnership agreement which sets out how the business will be run (e.g. how profits are shared and how decisions are made) . A partnership also has unlimited liability.(e.g. Ben and Jerry's)
Advantages : A partnership is the easiest way for two or more people to set up a business. The business has more view points when making decisions and possible specialist skills from each partner. Each partner can help raise finance through investments.
Disadvantages : If one partner makes a bad decision the other partners also suffer from it. A partnership has unlimited liability so the owners are fully responsible for all the debts.
LTD's
An LTD (limited company) is a business where the owners and the business are separate. The people that own the business are the shareholders therefore giving the owners limited liability (e.g. River island)
Advantages : The limited liability protects the shareholders from any debt the business might get into. It is also easier for the business to raise finance because of the money gained from selling the shares.
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PLC's
A PLC is a limited company that gives the public the opportunity to buy shares making them into shareholders. The shareholders of a PLC have limited liability. (e.g. BP)
Advantages : It is very easy to raise finance due to everyone being able to buy shares. and the shareholders are protected from the debts that the company gets so if the company goes bankrupt they only lose the money they invested.
Disadvantages : You have to give business information to the public. Also due to the shares being open to the public you have to account for the larger number of share holders.
Public sector
If a business is part of the public sector then it is run to benefit the public and it is either owned by the government or an organisation that is owned by the government. They generally have a not for profit business model although they can still be for profit.(e.g. NHS)
Advantages : Since they are owned by the government revenue won't tend to be an issue because costs will get paid by the government which they get from the public.
Disadvantages : Since they are not for profit the owner of the business might not make as much of a wage as they would if the business was part of the private sector.