Week 2 - Organisational Structures Flashcards
(39 cards)
Types on business ownership
- Sole trader
- Partnership
- Limited liability partnership
- Private Limited Company
- Public Limited Company
- Non-Profit
-Co-Operative
Sole trader - Definition
One person owns the business and has full control of how it’s run
Sole Trader - Pros
- Easy to set up, with minimal paperwork
- You have full control of the company and can make all business decisions
- You keep all the profits from the business, after tax
Sole Trader - Cons
- You are responsible for all business debts
- You are personally liable if someone sues your business
- It can be harder to secure finance for your business
Partnership - Definition
Yu and your business partners own the business between you.
You must all agree to invest in the business, and you all take on personal responsibility for repaying business debts.
Partnership - Pros
- You have more owners to help run the business and make business decisions
- Pools talent, with each partner using their own strengths and skills to help the business
- It’s often flexible and easy to set up
Partnership - Cons
- Partners are jointly responsible for business debts
- Each partner needs to file their own tax return
- It can lead to disagreement if you have different views
Limited liability partnership - Definition
A limited liability partnership (LLP) is another way of owning a business with someone else, but it gives you more protection than a general partnership. That’s because each partner has limited liability, depending on how much they invest in the business
Limited liability partnership - Pros
- Partners share ownership and decision-making
- Pools talent and allows for flexible management
- Limits partners’ liability for company debts
Limited liability partnership - Cons
- Each partner must file their own tax return
- It can sometimes be difficult to reach agreements if there are several partners
- It can involve more administrative tasks, including preparing accounts
Private Limited Company - Definition
A private limited company is a type of business that’s privately owned by its shareholders
Private Limited Company - Pros
- Limited liability for repaying company debts
- More professional setup, which can make you more attractive to clients and lenders
- Can be more tax efficient, as you pay corporation tax on your business profits
Shares cannot be sold to the public, protecting the company from loss of ownership
Private Limited Company - Cons
- There are lots of legal requirements, including filing annual accounts and returns to Companies House, and paying corporation tax
- It can take a lot longer to set up
- The business must transfer money to you in the form of a salary or dividend payment
Public Limited Company - Cons
- Increased regulation
- You could start to lose control of your business
- Can be vulnerable to takeovers as other businesses can buy shares in your company
- You need at least two directors to run the company
Public Limited Company - Definition
A public limited company (PLC) is also a separate legal entity and is again managed and owned by its directors and shareholders. However, the key difference is that a public limited company can offer shares to the public by listing the company on a stock exchange.
Public Limited Company - Pros
- Can help you to raise investment quickly
- Owners have limited liability
- Can be more tax efficient, as you pay corporation tax on your business profits
- Listing your business on a stock exchange can raise brand awareness
Non-Profit - Definition
A non-profit organisation operates for public or social benefits rather than to generate a profit. This means that any income earned won’t go to the owners or members.
Non-Profit - Pros
- Your non-profit may not need to pay corporation tax
- As an owner, you’re protected from personal liability
- You may be eligible to receive grants
Non-Profit - Cons
- There might be public scrutiny over how you use funds and donations
- You must follow certain rules when setting up a non-profit
- You won’t receive any of the income
Co-Operative - Definition
A co-operative is a business or organisation that’s democratically owned and controlled by its members. Members can be customers, suppliers or employees, and they all have a say in how the business is run. They also share in the profits.
Co-Operative - Pros
- Can be easy to set up
- Each member has voting rights
- Limited liability for members
Co-Operative - Cons
- Everyone is equal, no matter how much they have invested
- It can take a long time to make decisions
- Co-ops may have limited capital as they rely on member contributions and retained earnings
Factors to Consider when starting a business
- Start-up costs
- The level of responsibility
- Personal Financial risk
- Tax implications
- Growth Plans
Services lines - Definition
The different areas of service or specialisation that a company or organisation offers
