Business Structures Overview

Sole Trader

• Easy to set up with low costs
• Owner makes all decisions and keeps all profits
• Difficult to secure loans
• Unlimited liability for debts
• Long working hours & limited time off
• Sole responsibility for all aspects of business
• Challenges if owner becomes ill

Partnership

• Managed by 2-20 people
• Workload shared
• Partners can specialize in different areas
• More capital invested
• Unlimited liability for debts
• Potential for disagreements
• Profits shared amongst partners
• Business disruption if a partner leaves

Why bring in more partners?

• Gaining expertise
• Generating new ideas
• Increasing capital investment

Franchise

• Agreement to use an established brand name and products/services
• Offers a way to run a business, not a business itself

Franchisee

• Reduced marketing costs due to established brand

• Lower risk compared to starting independent business

• Potential for training and support from franchiser

• Products, pricing, and store layout often dictated by franchiser

• Royalty payment (often a percentage of revenue) required

• High initial costs are common

Franchisor

• Fast expansion method without significant investment
• Steady cash flow from royalty payments
• Shared risk between franchiser and franchisee
• Negative impact on reputation if franchisee performs poorly
• Risk of franchisee failing to return funds

Case study: Subway

• Investment of £100,000-£150,000 for a Subway franchise
• Franchisee granted right to operate in a specific location and use the brand
• Fees provide access to national advertising, brand awareness, and support

General Business Disadvantages

• Substantial setup costs
• Lack of control over who buys shares
• Requirement to publish annual accounts
• Need to comply with company regulations

General Business Advantages

• Easy access to loans due to larger size
• Limited liability

Types of Organisations

• Three main sectors: private, public, and third

Types of Businesses

• Private Sector:

  • Sole trader
  • Partnership
  • Private Limited company
  • Public Limited company
  • Multinational company
  • Franchise

• Public Sector:

  • Public sector organization
  • Local council (government)
  • Public corporation

• Third Sector:

  • Charity
  • Voluntary organisation
  • Social enterprise
  • Co-operatives

Private Sector Aims

• Maximize profits
• Transform innovative ideas into successful businesses
• Expand the business for continued growth

Private Sector Examples

• Private Limited companies (Ltd)
• Public Limited companies (PLC)
• Franchises

Limited Companies

Private Limited Company (Ltd)

• Shares are privately owned, not available to public
• Minimum of one shareholder

Public Limited Company (PLC)

• Shares are available for purchase by the public on the stock market
• Minimum of two shareholders
• Owned by shareholders
• Controlled by a board of directors
• Must produce a memorandum and articles of association

Private Limited Company (Ltd) Advantages

• Ownership control remains with insiders
• Easier to raise finance from shareholders and lenders
• Boards of directors bring experience to aid decision-making

Private Limited Company (Ltd) Disadvantages

• Profits shared amongst more people
• Shares cannot be sold to the general public
• Must comply with company regulations

Private Limited Company (PLC) Advantages

• Ability to raise significant capital by selling shares
• Limited liability for shareholders

Different Sectors of the Economy

Multinational Corporations (MNCs)

• Operate branches or subsidiaries in multiple countries
• Establish production facilities in different nations
• Motivations:
  • Increase market share
  • Accessing cheaper labor & lower production costs
  • Utilizing government grants
  • Tax avoidance or reduction
  • Reducing transportation costs
  • Bypassing trade barriers

Public Sector

• Focused on delivering high-quality services to all citizens

• Utilizes taxpayer funds to provide essential services

• Examples:

  • Police
  • Schools
  • Hospitals
  • Fire brigade
  • Army
  • BBC

• Ownership and Funding: Owned/controlled by local or national government, financed by taxes.

Third Sector

• Aims to support worthy causes, raise awareness, & provide quality services
• Provides support for food, shelter, clothing, funding, and awareness
• Organizations:
  • Charities
  • Voluntary Organizations
  • Social Enterprises
  • Co-operatives

Charities

• Established to help others
• Raised finances through donations, sponsorships, and fundraising
• Not owned by individuals, but are set up as trusts

Explore the different types of business structures, including sole traders, partnerships, and franchises. Learn about the advantages and disadvantages of each to make informed decisions for your business aspirations. This quiz will help deepen your understanding of business management fundamentals.