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Types of Business Organisation - Coggle Diagram
Types of Business Organisation
Sole Trader:
A business owned and run by one person. This person has sole responsibility for the business e.g. local convenience shop / taxi / hairdressers.
Formation:
Easy to set up
as there are few legal requirements.
Must
register for self-assessment income tax
.
If business name differs from sole traders name, the name must be registered with the CRO
Features/ Characteristic
Control
/Decision Making (the sole trader)
Profits
(Keeps all profits - after self assessment tax)
Liability
(unlimited)
Dissolution
(No continuity of existence. Ceases to exist if the owner dies, retires or closes down)
Finance
(Personal savings, debt capital / loan, grants)
Partnership
: A business with between two and twenty partners who agree to run the business together. e.g. doctors office / solicitors
No seperate legal entity
Deed of partnership:
Features
Finance
(Debt capital, Partners' equity capital - access to larger capital)
Unlimited liability
(collectively responsible for each other’s partnerships debts.)
Control/ decision-making
(shared. Higher quality. Slower / Power Struggles)
Profits
(Shared based on deed of partnership)
Dissolution
(Agree to dissolve, one partner has become bankrupt / dies. )
register with CRO + Revenue
2-20 partners
Private Limited Company:
A business organisation owned by one or more shareholders. E.g. Dunnes Stores Ltd
Types
Designated Activity Company (DAC)
. 1-149. Limited Liability. AGM - mandatory. e.g. Ulster Bank
Company Limited by Guarantee (CLG
). 1 - unlimited. Limited Liability. AGM - mandatory. e.g. local sports organisation
Company Limited by Shares (LTD)
. 1-149. Limited Liability. AGM - not mandatory.
Unlimited Company (UC)
. Unlimited Liability. AGM - Mandatory with >2 shareholders.
Formation
Document Preparation.
Submission.
Certificate of Incorporation
Features
Profits
Board of directors decide how the profits are used (retain / pay shareholders in the form of dividends). Corporation tax.
Dissolution
Continuity of existence - shares can be sold / passed on e.g if a shareholder dies. Agreement
Control/Decision Making
Shareholders have input (e.g. AGM). 1 vote per share.
Liability
- shareholder have limited.
Finance
- Can sell shares / take out a loan / grants
Co-operative:
Must register with
Register of Friendly Societies
and
Revenue Commissioner
Worker co-op (worker buy out to secure jobs)
Financial Co-op E.G. credit union
Producer Co-op
Consumer Co-op
Features:
equity finance
limitied liability
control
profits
dissolution
one vote per person
co-operation tax - 12.5%
A co-operative is owned and controlled by members rather than shareholders. It is run in a
democratic
manner and operates for the benefit of its members.
Each member has an equal say in the running of the co-operative i.e.
one member = one vote.
At least 7 members
E.g. Savvi Credit Union Limited
State Owned Enterprise
Formation
By passing an Act of the Oireachtas
The government registers the company with the CRO and the government is a shareholder.
Advantages
Provide Employment.
Provide Essential Services.
Income for the Government
Disadvantages
Lack of Profit Motive.
Loss-Making.
Management.
E.g ESB
Public Limited Company:
A business organisation whose shares (stocks) can be bought and sold by the general public.
Formation
When private limited company or other form of business seeks a stock exchange listing or quotation.
They must have a
good trading history
Advantages
Limited Liability.
Finance.
Business Reputation.
Ability to Borrow.
Disadvantages
Difficult to Set Up.
Lack of Confidentiality.
Profits.
Hostile Takeovers.
Franchises
Franchiser
Franchisee
Finance - franchisee invests
limited liability
franchior has control - franchisee manages franchise
annual fee + share of profits paid to franchisee
dissolution
mutual consent
breach of agreement
E.G. Mcdonalds
Strategic Alliance / Joint Venture
Formation
When all parties enter into a contract to work together on a business project.
For a specified period of time or for a specific project
Changing Organisational Structure
To expand
To acquire skills
To reduce risks
Taxation
To raise finance