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Understanding Business Structures

Understanding Business Structures. Types of Business Structure. Sole Trader Partnership Limited Companies Co-operatives Franchises. Sole Trader  Benefits. Benefits include: Easy to set up and run Only small amount of capital needed

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Understanding Business Structures

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  1. Understanding Business Structures

  2. Types of Business Structure Sole Trader Partnership Limited Companies Co-operatives Franchises

  3. Sole Trader  Benefits Benefits include: Easy to set up and run Only small amount of capital needed Owner has total control and doesn’t have to share profits

  4. Sole Trader  Drawbacks Drawbacks include: Unlimited liability Lack of economies of scale The business relies on the owner 100%

  5. Partnership  Benefits Benefits include: Shared responsibility Allowing partners to specialise Partners bring in more capital investment Decisions, costs are shared

  6. Partnerships  Drawbacks Drawbacks include: Each partner has unlimited liability Shared responsibility can lead to disagreements Profits have to be shared according to Deed of Partnership

  7. Limited Companies There are two types: 1. Private Limited Company (Ltd) 2. Public Limited Company (Plc)

  8. Private Limited Companies Benefits include: Company can raise more capital by selling more shares Shareholders can keep control of the business

  9. Private Limited Companies Drawbacks include: Accounts must be audited Limited companies are more difficult to set up Shares cannot be sold publicly on the stock market

  10. Public Limited Companies Benefits include: Easy to raise capital for expansion by selling shares on the stock market Economies of scale are better than a private Ltd company

  11. Public Limited Companies Drawbacks include: Expensive to set up (a lot of capital is required) Annual accounts must be made public Anyone can buy shares – so it’s vulnerable to takeovers

  12. Co-operatives There are two types: 1. Worker Co-operatives 2. Consumer Co-operatives

  13. Worker Co-operatives… …Are owned by the whole workforce …Everyone has a say in the business

  14. Consumer Co-operatives… …Are local Co-op shops owned by the customers …The profit is paid out or used to keep prices down

  15. Franchises An existing company (the franchisor) lets someone else (the franchisee) use its business idea and name The franchisee buys a licence to carry out the business of the franchisor The franchisee must also run the business in the same way as the franchisor In return, the franchisor helps the franchisee set up the business

  16. Overview of business structures Understanding business structures Focus on sole traders Focus on partnerships Focus on companies

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