Types of Business Organisations

Sole Trader
The sole proprietor bears all the risk He/she receives all the profits He/she provides all the finance which forms a permanent part of the business He/she has full control of the business Usually a small business Personal and bank loans can be used, but they cannot form part of the permanent capital ie they are always repayable

Advantages of being a Sole Trader

Greater self interest in the business Decisions can be made faster No arguments about decisions Overall knowledge of the business Close contact with employees, if small business Easier to establish this type of business

Disadvantages of being a Sole Trader

Can be a burden for one person Small loses can ruin business, only one person is financing it No one to bounce ideas off or ideas can be limited if only coming from one person Illness or holiday can cause chaos One person bears all the risk

Partnership
All partners are liable to an unlimited extent for debt All profits are shared equally between partners No partner can claim a salary for work performed Disputes settled by a majority vote All partners must agree when intending to alter the nature of the business All partners must agree to further partners joining

Limited Partners
May have limited liability for the business They are only liable for debts up to the value of money they put into the business They cannot take part in the management of the company Must be registered with the Register of Joint Stock Companies

Advantages of Partnerships
A number of people can raise more cash Partners can have fields of specialisation (talents) Problems can be shared More ideas coming forward Sharing the strain of running a business Losses can be shared New partners can provide a stimulus to a business

Disadvantages of Partnerships
Unlimited liability Assets cannot be realised easily Decisions can take a long time Profits have to be shared Liability for partners actions Disagreement between partners

Limited Company
A limited company has a separate legal existence from its owners (shareholders) ie the company can enter into a contract in its own name, a sole trader must use his/hers Finance is obtained by the sale of shares profits are distributed as dividends on the basis of the shares held All shareholders have limited liability

Private Limited Companies

Have the word Limited at the end of their name Cannot invite members of the public to invest in its ownership Shares cannot be transferred to another person without the consent of all other shareholders Shares are not advertised on the stock market

Public Limited Companies

Fewer in number than Private Companies but usually much larger Shortened to PLC Must have a minimum of two shareholders, private is one Shares can be purchased on the stock market Public does not mean state controlled

Advantages of Limited Companies

Large amounts of finance can be obtained through share issues, upto its authorised capital limit Can work to a larger scale Shareholders have limited liability Control of the company can be divide between a number of people The company has a separate legal existence and is therefore unaffected by changes to directors etc.

Disadvantages of Limited Companies

Less flexibility in control and decision making Can be a lack of understanding because of the size of the company Complicated legal procedure to set up a limited company, it is costly and takes time Maybe lack of interest from directors if they do not have shares in the company

Co-operative - Worker (producer)

Owned and controlled by those who work in it They make all the management decisions Profits are shared out on an agreed basis Can fail due to not having the correct management experience Problems can arise when some of the profits are not reinvested in the company

Co-operative - Consumer (retail)

Owners are the consumers, those who purchase the goods No maximum number of members Profits distributed as a cash dividend One member one vote Members receive a fixed rate interest on their share capital

Public Sector
Provision of goods and services by the state Areas of economic activity in which the government is involved Most public companies eg British Coal, British Steel etc have been transferred into private ownership through privatisation Their finance is raised through taxation by the government eg Air traffic controllers

Voluntary
Usually have charitable status, tax incentives etc Companies usually have volunteers and some paid staff (usually management) They are not set up to make a profit Staff tend to be very committed to the particular cause Still have to break even, must make enough to cover their costs Financed sometimes from government