1.4 Factors Influencing Ownership

Question 1

How does legal status influence ownership ?

Answer 1

Almost like the company is a person on its own a separate business activity.

Sole trader and partnerships, not separate entity.

Private and public limited companies, charities, separate entity.

If you are not separate you could lose all personal possessions.

Question 2

How can liability influence ownership and it’s objectives?

Answer 2

Businesses must consider financial risk involved when choosing a form of ownership.

Eg sole trader or partnership involves higher personal risk and limited companies will lower that risk.

It may also depend on personal situation of owners

Question 3

How does funding influence ownership and it’s objectives ?

Answer 3

Some forms are more expensive to set up, more paperwork files

Sole trader has to pay tax but doesn’t have a set legal process it must follow like companies.

Business must consider if the large financial outlay to set up is outweighs by benefit of becoming public

Question 4

How does control/decision influence ownership and it’s objectives ?

Answer 4

Form of ownership chosen will determine amount of control.

Sole trader has full contour because there is only one person but partnership

Shareholders control private limited companies

Shareholders in public limited companies will elect a board of directors but shareholders are still owners.

Question 5

How does legal/administrative influence a business and its objectives ?

Answer 5

Much simpler to start up as a sole reader than limited company

Once business is trading there are different requirements for the different ownership forms.

Limited companies have more complex legal requirements

Public companies have to be audited, have to submit tax returns to companies house