Business OwnershipSole TradersPartnershipsPrivate Limited Companies (ltd)Public Limited Companies (Plc)Co-operatives

First, we must learn...(un) Limited Liability(un)incorporatedunincorporated1 Legal entityincorporated2 Legal entitiesUnlimited LiabilityThe owners are responsible for all debtsLimited LiabilityThe owners are not responsible for all debts

Business ownershipPlcCo-op

1.4 Legal structureSole tradersA sole trader is an individual who owns and runs their own business. The simplest form of business. A sole trader has unlimited liability - they are personally responsible for all debts run up by the business. They could lose their home and all of their assets to pay off any debts that they are unable to pay.

1.4 Legal structure

1.4 Legal structureSole tradersBenefits and disadvantages of being a sole traderBenefitsCheap and easy to set upAll profits go to you!Competitors cant see your accountsHighly motivatedYou are the boss!

DrawbacksUnlimited liabilityLimited financeDifficult to find cover when ill

1.4 Legal structure

Choosing the appropriate legal structure1.4 Legal structureSarah has always dreamt of being her own boss and at the age of just 22 an opportunity arose. Patricia, the owner of the gift shop where Sarah worked, was due to retire and close the business that she had operated as a sole trader for over 40 years. Sarah wondered whether she had the necessary skills to run the shop herself and finally plucked up the courage to talk to her boss about her buying the shop.Question TimeWhat is meant by the term sole trader.(2 marks)Explain one advantage of Patricia running the shop as a sole trade(2 marks)Explain one disadvantage of Patricia running the shop as a sole trader.(2 marks)Identify and explain three skills Sarah would need to operate the shop as a sole trader?(6 marks)

1.4 Legal structure

1.4 Legal structurePartnershipsA partnership is where 2-20 people run the businessEach partner is equally responsible for debts incurred.Each partner will take a share of the profitsEach partner usually shares in the decision making. Sleeping partners invest in, but do not run, the business.

1.4 Legal structure

1.4 Legal structurePartnershipsBenefits and disadvantages of being a partnershipBenefitsRisks and responsibilities are sharedMore specialist skillsCompetitors cant see your accountsEasier to raise finance than a sole traderDrawbacksUnlimited liabilityArguments can occur between partnersIf a partner dies, resigns or goes bankrupt the partnership is dissolvedTrust becomes a significant element between partners

1.4 Legal structure

Limited companiesLtdPlcOnly friends & family can buy sharesAny member of the public can buy shares

1.4 Legal structurePrivate Limited CompaniesPrivate Limited Companies have Ltd. after the company name.

They can have one or more members e.g. shareholders

The shareholders are often family members and have a say in the running of the company

1.4 Legal structure

Starter

Spend 1 minute thinking of all the facts about one type of business ownership (partnership / private limited companies / public limited companies)

Spend another minute discussing with your partner your type of business ownership

Feed back to the class

1.4 Legal structurePrivate Limited CompaniesPrivate Limited Companies exist in their own right. The owners and the company are separate legal entities. Therefore, the companys finances are separate from the owners personal finances.Shareholders are the owners of Private Limited Companies. Shareholders have limited liability they are not responsible for the companys debts. Shareholders can only lose the money that they have invested in the business in the form of shares.

1.4 Legal structure

1.4 Legal structurePrivate Limited CompaniesIncorporationPrivate Limited Companies must be registered (Incorporated) at Companies House. .They must send to the Registrar of Companies the following:A Memorandum of Association name, registered office and what the company will doArticles of Association the rules of running the companyThey must deliver to Companies House each year a true and fair set of accountshttp://www.youtube.com/watch?v=CG2T7upUVAk&NR=1

1.4 Legal structure

1.4 Legal structurePrivate Limited CompaniesBenefits and disadvantages of being a Private limited companyBenefitsLimited LiabilityIncreased sources of financeMore expertise availableDifficult for hostile takeovers to occur

DrawbacksCompetitors can see financial informationDifficult to sell shares for individual shareholders other shareholders have to agreeGreater legal constraintsCant sell shares to the general public

1.4 Legal structure

Choosing the appropriate legal structure1.4 Legal structureSarah has spoken to Patricia about her idea of buying the shop and was delighted by Patricias response. Patricia was thrilled to think the business she had built up would continue to exist after her retirement and started the process of valuing the business. That night Sarah told her boyfriend Bobby of her idea. Bobby had just been made redundant and offered to share the business with Sarah, thinking they could set it up either as a partnership or a limited company.Question timeWhat is meant by the term partnership?(2 marks)What is meant by the term limited company?(2 marks)Explain 2 advantages of Sarah accepting Bobbys offer of sharing the business.(4 marks)Explain 2 drawbacks of Sarah accepting Bobbys offer of sharing the business.(4 marks)

1.4 Legal structure

PlcAny member of the public can buy shares in a Plc.

EndOK, You have 2 minutes to find out as much as you can about a Plc

Co-OperativeCo-operatives are groups of people who agree to work together and pool their resources. EndOK, You have 2 minutes to find out as much as you can about a Co-Operative

Do you want to start a business?The easiest way to start a business is becoming a ____________. This is a type of business ownership, when an entrepreneur rents the idea of a business from another company.

FranchisesA franchise is when one business (the franchisor) gives another person or business (the franchisee) the right to trade using its name and to sell its products or provide its servicesThe franchisee normally pays a licence fee and a percentage of profit to the franchisor

1.1 Starting a Business Enterprise

1.1 Starting a Business Enterprise

Your taskYou are interested in becoming a subway franchisee. Explain why you want to become a Subway Franchise (what are the advantages)What hesitations do you have about becoming a Subway Franchise?Where would you like to set-up your Subway Restaurant. Why?http://www.youtube.com/watch?v=vaTHDa5jqDI

FranchisesAdvantagesLower risk optionAlready establishedRecognised brandHelp and supportNational advertising and promotionTried and testedDisadvantagesSet up and running costs can be highShare profitReliant on othersLess independence in decision makingDamage to brand reputation1.1 Starting a Business Enterprise

1.1 Starting a Business Enterprise

1.1 Starting a Business EnterpriseTessa runs a chain of three tea shops in the Lake District, each called Tea Time Treats, followed by the name of the closest lake e.g. Tea Time Treats in Windermere. The tea shops have built a up a good reputation for fine quality teas and delicious home made cakes to eat in or take away. Tea Time Treats is now featured in many tourist guides for the area, always with rave reviews. Tessa is now keen to expand the business and is considering offering the Tea Time Treat name as a franchise.Question timeWhat is meant by the term franchise? (2 marks)Would Tessa be the franchisor or franchisee? (1 mark)Explain two reasons why an entrepreneur might choose to buy a franchise from Tea Time Treats (4 marks)

1.1 Starting a Business Enterprise

2 Minute TestState 2 reasons why businesses existState 2 sources of business ideasWhat name is given to a not for profit business?What name is given to a gap in a market?State two reasons for starting a businessState two advantages and two disadvantages of a franchiseEnd1.1 Starting a Business Enterprise

1.1 Starting a Business Enterprise

Your TaskYou need to make a poster, for ONE type of business ownership. This poster must contain:DefinitionsAdvantagesDisadvantagesPictures / Diagrams

**************