Business ownerships Essay
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The different types of business ownerships are:
When only one person owns the business. They do not share the profits with anyone; a sole trader is somebody who controls his/her own business. Have unlimited liability. They can employ people to help them at work but they have sole responsibility of the business.
The advantages of being a sole trader are:
Make own decisions.
Does not have to share profits.
Always know what is happening in business as they make all the decisions.
Control of business cannot be lost.
Easier to set up own business.
Little capital is needed when setting up a sole trader.
Management is simpler.
More self esteem when they own their own business.
The disadvantages of being a sole trader are:
Because the business has unlimited liability is means that if the business in unsuccessful the sole trader will have to pay back all the businesses debt.
The sole trader can become extremely stressed because they are in full control of the business.
Not much time off, unless someone else takes over.
When big companies are owned by sole trades. The two main parties involved are the franchisee and franchisor. The franchisor allows the franchisee to use the businesses name, product and layout in return for a share of the profits made.
The advantages of being a franchise are:
The business can expand.
Franchisee’s get a chance to run the business for a greater chance of success.
The disadvantages of being a franchise are:
If the franchisee is unsuccessful the business may get a bad reputation.
The franchisee cannot make decisions without the franchisors authorisation.
The franchisee does not automatically have their agreement renewed.
A partnership usually involves between 2-20 people. The profits made has to be shared among all workers. Legal documents such as the Deed of partnership have to be signed before the business can begin.
Advantages of being a partnership:
There is more than one person in charge.
Ideas can always be shared.
Everyone can be part in the area they are most strongest in.
Disadvantages of being a partnership:
Arguments may occur.
Partners have unlimited liability so they will be less willing to invest.
The legal documents have to be completed, and this process may take a while.
Public limited company (PLC):
Is usually a larger business, they employ far more people than a private limited company. Shares can be bought and sold by members of the public on the stock market. The prices of shares vary.
Advantages of being a public limited company:
PLC can raise capital easily.
All shareholders have limited liability.
Disadvantages of being a public limited company:
Because shareholders of a PLC are members of the public, control of the business can be lost is someone buys a great number of shares.
Shareholders may feel isolated because they don’t know each other.
Workers/ retail Co-operative
A workers co-operative is owned and run by the whole work force so there will be no arguments between the owners and workers as they are the same people. People who own part of workers co-operative are called members. Membership of workers co-operative tries to ensure that everyone has a say in how the business is run. All members are in control of the business.
Retail co-operative shares its profits amongst its members. People who own a share of the retail co-operative is called a member. The first retail co-operative was set up in Rochdale in 1844.
Advantages of workers co-operative:
More motivated because they know they will receive a share out of the profits.
Opinions are heard.
Disadvantages of workers co-operative:
Long time for decisions to be made.
Business may suffer, because there are no specified leaders.
Not many people have faith in co-operatives so they are not always well supported.
Private limited company (LTD)
People who own part of a private limited company are called shareholders. Family and friends can only buy shares for a private limited company.
Advantages of a Private limited company:
Family & friends can only buy shares.
Capital can be raised because there is no limit on the number of shareholders.
Disadvantages of a Private limited company:
Shareholders may argue or disagree.
Restrictions for selling shares.
Tower Colliery is a Worker co-operative this means that the business is owned by all of its workers. There isn’t one main person in workers co-operative because they all own it.
It is a limited liability business as it is a worker co-operative, as it is the work forces problem if the company is in debt. Tower colliery has a legal status.
Tower Colliery suits their workers co-operative as all the workers get an opinion on how the business is run and also they get a share of the profits.
Tower colliery is a medium sized business.
Some of the advantages of being a worker co-operative are:
Happy workers; because views and opinions are heard.
More motivated; because they know they will receive a share of profits.
Work harder; because it is owned by the workface.
No arguments; because they are on the same level.
Some of the disadvantages of being a worker co-operative:
Decisions; will take longer to make them.
May suffer; because there are no specified leader which could result in failing to reach aims.
Support; few people have faith in co-operatives so they are not always well supported.
Spar is a Franchise ownership as it is owned by a family. The only one person that owns spar is the franchisee because they have brought a branch of the group that own ‘Spar’. It has limited liability.
It has legal status.
Some advantages of being a franchise are:
Because they have so many shops around there is more profit being made.
The business can expand.
Franchisees get the chance to run business that has a greater chance of success than for example, a sole trader does.
Some disadvantages of being a franchise are:
If the franchisee is unsuccessful the business may receive a bad reputation.
The franchisee cannot make any decisions without getting permission off the franchisor.
The franchisee does not automatically have their agreement renewed: the agreement has to be renewed regularly. This may create uncertainty for the franchisee.
This store may suit ‘Fred’ because he may live closely to this branch and it sells everyday products that he may need so he doesn’t have to go to a larger store which is further away.