| What is the Public and Private Sector in Business? | Public Sector are organisations ran by the Government. This includes Hospitals and Schools
Private Sector are businesses ran by indivudals, not the government. They still go by the rules however. |
| Evaluate Sole Traders | Businesses owned by 1 person [can employ others] The owner is called the Sole Proprietor. |
| Whats good about a Sole Trader | -Not many legal regulations to worry about
-You are the Boss. You control the Business.
-You can have freedom over your holidays, hours of work, prices to be charged and who to employ
-You have close connections with customers which leads to responding quickly to the needs and demands.
-The profit the business makes, goes to you! This gives motivation to carry on
-Your information about the business is kept secret [excluding the Tax Office] |
| Whats bad about a Sole Trader | -You can't discuss your business problems to anyone really
-You have Unlimited Liability. Your business and personal accounts are not seperated
-Hard to raise money to expand. Also having to rely on savings and profits via the business. Also bank loans
-You can't be good at everything! Its quite expensive to get a specialist workers
-Small businesses can't exactly take Economies of Scale
-If you receive an illness, no one can take over |
| Whats Unlimited Liability? | This is when the owners of the business is connected to the debts of the Business. IF the Business shuts, the debts are going to be against your personal account. |
| Whats Limited Liability? | This is when the debts of a Company does not affect the Shareholders [owners] If it does shut down, the money put in the Company will only be lost. The Company is a 'Separate Legal Entity' |
| What is a Partnership? | A Partnership is when 2-20 people open a Business together. They each have a say to the Business and they share the Profits. |
| How are Partnerships made? | They are easy. Using a Partnership Agreement or Deed of Partnership is a common way. This helps the present and any conflicts about shares of profit [for example] |
| What does the Partnership Agreement include? | -Nature of Partnership
-Location of Business
-Partnership Name
-Capital
-Shares of Profits and Losses
-Drawings
-Duties of Partners
-Termination of Partnership
-Arbitration [sorts out disputes]
-Signature of the Entrepreneurs |
| Advantages of Partnerships | -Quite easy to set-up
-More Capital [investment money] brought in.
-Multiple Owners can bring new skills and features
-Decision making is easier. More brains
-Responsibility is shared along with Duties |
| Dis advantages of Partnerships | -Disagreements makes Problems
-Capital will eventually be limited, making it harder to expand
-No Continuity [someone dies or bankrupts, goodbye business] However it can be reformed
-Unlimited Liability [its split to what the Partnerships Agreement says] |
| What is a Limited Company? How is it formed? | -Companies are formed when a Business sets up a separate legal identity
-The Company's finance is now not connected to the Personal Wealth of now the Shareholders [Owners]
-Shareholders receive a share [percentage] of the profits
-The Business is now ran by a Board of Directors. They are made up by people who were chosen by the Shareholders. Shareholders also can be part of the Board of Directors.
-The Board of Directors now 'runs' the company for you |
| Do Companies have Limited Liability? | Yes. Since the Company is now a separate legal identity, its Finance is also too separate, meaning personal wealth isn't affected if the Company has Debts. |
| What are Private Limited Companies? | -Private Limited Companies can get funds via investors that are friends and family of the Owners. The shares however, aren't public.
-Examples are River Island, Clarks and Wilkinson |
| Advantages of Private Limited Companies? | -Limited Liability
-Can sell shares equalling finance
-Stable form. Companies can still exist even if the Shareholders change
-Previous owners still have control |
| Disadvantages of Private Limited Companies? | -Shareholders need to agree how the profit is divided
-Administration costs more then setting up a Sole Trader
-Finance is limited to Family and Friends
-Not that much privacy. Public can still see some company information
-Directors legal duties are stricter |
| What is a Public Limited Company? | -Very complicated and expensive to start up, but has its shares on thje Stock Exchange. |
| Advantages of a Public Limited Company? | -Limited Liability
-Large amounts of money can be generated via the Stock Exchange
-Stable form. Business can still continue with a change of Shareholders
-Firm is more Prestigious |
| Disadvantages of a Public Limited Company? | -Shareholders have to agree who gets what [profits]
-Finance limited to the Stock Market Valuation
-Public can easily see company Information and accounts
-Risk of company being taken over [someone who gets 50% of shares can challenge the Owner]
-Gap between Ownership and Control |
| What factors in choosing the Right suitable legal Structure for a Business? | -Size of Business; Sole Traders are the most common start up's , as they're easier and quicker
-Type of Business; Skilled jobs like Doctors or Vets usually go into Partnerships. If risks are present, Ltd's [Private Limited Company
-Lender Requirements; Banks may want Sole Traders and Partnerships, as they are more confident it will be handed back
-Investment protection; Limited Company may be the pathway if you concern mostly about your Personal Wealth
-Control; Sole Trader Owners, or Shareholders holding most of the shares has control over the Business
-Growth; Plc's allow greater sums of Finance to be raised. |
