Governance & Funding

Question 1

Sole traders

Answer 1

Governance

•make all decisions about business themselves
•not accountable to anyone

Benefit: Quicker to make decisions
Negative: does not benefit from diverse viewpoints

Funding

•personal sources
•profits from business reinvest
• loans from family or friends (bank loan needs formal business plan)

Question 2

Partnerships

Answer 2

Governance

• partnership agreement in place for each individual partners rights and responsibilities
  • how profits shared
  • what is done in the event of death or retirement or admission of new partner
• how business will operate day to day basis (e.g for context)

Benefit:
- More viewpoints

Negative:
- more clashes
- not a legal requirement however if no partnership agreement in place, partnership act (1890) in place and partners won’t always agree with its provisions

**Funding **

•More likely to get funding from bank as viewed as less risk as sole trader
- the more partners, the more risk is shared
•partnership isn’t separate legal entity from owners

Question 3

Limited liability partnerships (LLP)

Answer 3

Governance

• must have partnership agreement in place (how organisation will be administered)
• must be registered at companies house

Funding

• registered at companies house so LLP can enter contracts or own property.
• raising finance from banks easier easier as LLP is separate legal entity responsible for assets and liabilities

Question 4

Limited partnerships (LTD)

Answer 4

Governance

partnership agreement

• agreement should be in place how decisions made
• agreement in should be in place profits/loss shared.
• this agreement should be registered at companies house.

funding

Scotland: LP has separate legal personality from partners.
- easier to own property
- easier to enter contracts

Benefit: easier to raise finance as separate legal entity responsible for assets and liabilities

England and wales: Limited partnership is not a separate legal entity, and does not have the same ability to raise finance as not a separate entity responsible for assets and liabilities.

finance is raised same way traditional partnership

Question 5

Private limited companies (LTD)

Answer 5

Governance

The company will operate according to its articles of association
-must have at least 1 director
-common for owner to be shareholder and director

Funding

• shares traded privately, usually between family and friends.
• easier to raise funds through banks then sole traders
• large companies who’s statements are audited, easy to get funding

Question 6

Public limited companies (PLC)

Answer 6

Governance

Like LTD, PLC operates in accordance with articles of association
- Shareholders own PLC
- directors control PLC.

• independent non-executive directors, executive directors Requirement of corporate governance code most PLC (listed on stock exchange)
  FUNDING

*freely bought and sold on stock exchange. Route to raising finance

Question 7

Not for profit organisation (NPO)

Answer 7

Governance

Determined by

– unincorporated or incorporated.

• board of trustees to help with oversight

Funding

Profit usually reinvested into the organisation & used as a source of capital

Question 8

Public sector

Answer 8

Governance

• accountable to the government

Funding

• funded by the taxpayer
• government sets budget which must be operated within