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Forms of business organisations - Coggle Diagram
Forms of business organisations
Sole Traders
A sole trader is a business run by one person, they can have as many employees and equipment as they want but only one person receives the profits and makes the decisions
Advantages and Disadvantages
Advantages
Only one person gets the profits - they can also decide freely what to spend the profits on
Quick decision making
The easiest type to set up
Disadvantages
Unlimited liability - no legal distinction between business and personal assets --> If business fails then the sole trader will pay the price
Hard to get loans from banks because they see sole traders as risky
Very risky due to unlimited liability and potential lack of finance
Examples
Hair Salons
Mom and pop shops
Online sellers
Partnership
A business run by more then one person that has unlimited liability.
Advantages and Disadvantages
Advantages
More people have a say in business decision which can help the business make better decisions
More leaders = more expiance on the management team
More ideas can be brought into the business
Disadvantages
Profits are split between all partners
Still have unlimited liability so personal possessions can still be used to pay off business debts
No one single person has control of the business which could lead to infighting and power struggles
Examples
Dental practises
Legal Firms
Family owned businesses
Private Limited Company
A company with limited liability that can sell shares, though it is restricted to only being sold when all current shareholders agree to sell shares. Usually has LTD at the end of their names
Examples
JCB
Iceland
Thames Water
Advantages and Disadvantages
Advantages
Limited Liability - ensures that personal possessions cannot be sold to clear business debts
Much easier to acquire finance from banks because they are seen as less risky
Owners can remain control of the company by limiting output of new shares
Disadvantages
Legally obliged to publish accounts every year which can give competitors an idea on how the business is doing
Much more paperwork and costs which makes it unfeasible for smaller and new firms
Conflicts can happen between shareholders
Public Limited Company
A company with limited liability that sells their shares publicly without the need of current shareholder approval
Examples
Roblox
B&M
Apple
Advantages and Disadvantages
Advantages
Able to gain finance easily due to being seen as less risky by banks as well as the public buying shares
Limited liability - business debts are separate from personal debts
Can more easily expand
Disadvantages
Have to legally publish their accounts which can give compititors ideas on how they are doing
Owners could lose control of the business to others
Potential for infighting between shareholders
Charity
Generally a non-profit that fundraises for different causes (financial, social, environmental etc)
Examples
Cancer Research UK
Oxfam
Marie Curie
Advantages and Disadvantages
Advantages
Entrepreneurs can use their passion to help others
Generally have high reputation and trustworthiness
Generally gets tax relief and/or tax breaks from the government
Disadvantages
No profit is made, it is either reinvested back into the business or donated
Operations generally rely on donations so no regular income is presumed
Franchise
When a company sells the right to use their brand and likeness to startups and other business as a way to expand their business
Examples
KFC
Subway
Mcdonalds
Advantages and Disadvantages
Advantages
Can expand with diseconomies of scale
New businesses get a already established brand so they can spend less on marketing
Marketing is likely paid for by the parent company so the franchise spends less on it
Disadvantages
Have to pay royaltues and a percent of the profits to the franchisor every year
One badly run franchise could affect the reputation of other stores
Franchisor could have a controlling force on franchises by adding nw products without the consent of managers