T-Level Technical Qualification 300 Management and Administration (Level 3) PDF

T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core 1. Business context PowerPoint presentation PowerPoint 9: Legal entity types © 2022 City and Guilds of London Insti...

T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core 1. Business context PowerPoint presentation PowerPoint 9: Legal entity types © 2022 City and Guilds of London Institute. All rights reserved. 1 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Learning outcomes By the end of this session, learners should be able to: Identify the range of legal entity types that organisations can form. Describe the characteristics of each type and their place in society/industry. Compare the advantages and disadvantages of each legal entity type. Discuss the structure of each legal entity type and how they are governed. Consider potential reasons for selecting specific legal entity types for business. © 2022 City and Guilds of London Institute. All rights reserved. 2 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core What do we mean by the term legal entity? Definition: In business, a legal entity is any organisation or company that is recognised as having legal rights and responsibilities: such as – entering into contracts to act as a buyer, seller or supplier and (depending on its structure) can sue or be sued in a court of law. Sellers (Business) Buyers Suppliers © 2022 City and Guilds of London Institute. All rights reserved. 3 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities (1) There are TWO major types of business entities: unincorporated. incorporated. Whether a business is incorporated or not determines its status to be recognised as a legal person in its own right – to have a separate legal personality from its owners. © 2022 City and Guilds of London Institute. All rights reserved. 4 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities (2) Unincorporated legal forms There are FIVE main forms of unincorporated organisations: sole trader. ordinary partnership. limited partnership. unincorporated association. trusts. An unincorporated organisation does not have a separate legal personality from its owners, who are not protected from creditors and can be sued for debts owed by the organisation. © 2022 City and Guilds of London Institute. All rights reserved. 5 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities (3) Incorporated legal forms There are SEVEN main forms of incorporated organisations: limited company. limited liability partnership. community interest company. charitable incorporated organisation. community benefit society. cooperative society. financial mutuals. An incorporated organisation is legally recognised as a separate person. The organisation can sue or be sued on its own behalf. © 2022 City and Guilds of London Institute. All rights reserved. 6 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – social enterprises Definition: A business with primarily social objectives that reinvests surpluses in its purpose rather than maximising profits for shareholders and owners. A social enterprise is NOT a legal organisation structure. There is NO requirement to register as a social enterprise. All legal types of business can also be social enterprises, but some are set up specifically for a social cause: community interest companies. community benefit society. charitable organisations. There is no official lead body for social enterprises, but NGO Social Enterprise UK offers information and support: NGO Social Entrprise UK. © 2022 City and Guilds of London Institute. All rights reserved. 7 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – sole trader Definition: You are the sole owner, classed as self-employed and running your own business. It is the simplest form of business to set up and run: 1. Tell HMRC you are going to be self employed and pay taxes through Self Assessment. 2. Bookkeeping and accounts – keep a record of all sales and expenses. 3. Completed your HMRC self assessment every year (employ an accountant if necessary). 4. Pay income tax on any profits made in every year of trading. 5. Pay Class 2 and Class 4 National insurance contributions every year. 6. Register for VAT if your sales revenues will reach £85,000 or more. 7. Name your business – check the restrictions on www.gov.uk on the words you can use. © 2022 City and Guilds of London Institute. All rights reserved.. 8 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Sole trader – advantages and disadvantages Advantages Disadvantages Easier to set up and run than other Unlimited liability personal assets such business types. as your home or car can be seized to pay business debts. Owner keeps all the profits for More difficult to raise external finance themselves. and investment. Fewer rules and regulations than other May have no one to take over if you business types. fall ill or are injured. Make all the decisions and no one to Responsible for everything that goes disagree with them. on in the business. © 2022 City and Guilds of London Institute. All rights reserved. 9 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – partnerships Definition: When two or more people form a business together with a view to making a profit. There are THREE types of partnership: 1. Ordinary partnership. 2. Limited partnership. 3. Limited liability partnership. © 2022 City and Guilds of London Institute. All rights reserved. 10 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Ordinary (traditional) partnerships Generally, TWO+ individuals involved in a business to make profits All partners have equal authority within the business. All have the ability to manage and control the business. All can make legally binding decisions on behalf of the business. It is an unincorporated business organisation, meaning: All are ‘jointly and ‘severally’ liable for the debts of the business. Each partner is equally liable for the debts but also for the total debt. Any creditor who cannot recover what is owed from one partner can collect from any of the other partners. © 2022 City and Guilds of London Institute. All rights reserved. 11 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Limited partnerships (LP) – unincorporated with TWO levels of partners General partner Limited partner Must be at least one general partner in Makes a financial investment into the the business. business. They have authority to run or manage Has no authority to run or manage the the business. business. Can make legally binding decisions on Cannot be held liable for the debts of behalf of the business. the business. Has unlimited personal liability for the Can only lose the amount of money debts of the business. invested in the business. © 2022 City and Guilds of London Institute. All rights reserved. 12 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – limited liability partnerships (LLP) Incorporated entity with separate legal identity to the partners. Partners not responsible for business debts. All partners have limited liability. Partners are taxed individually. Taxes based on share of income. The LLP is not taxed separately (it pays no corporation tax). © 2022 City and Guilds of London Institute. All rights reserved. 13 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Forming partnerships Simple to set up but some formal actions are required Two or more people needed to form a partnership. Designate a nominated partner who registers business with HMRC. All partners required to register individually with HMRC for self-assessment. Draw up a partnership agreement Set start date, address, name and purpose of the business. Contact details and outline the duties expected of each partner. Descriptions of how much start-up capital each partner contributed. How any profits/losses will be distributed (fixed % or shared equally). What to do in the event of disagreements, a partner wants to change or leave. NB: A limited liability partnership will have to also register with Companies House. © 2022 City and Guilds of London Institute. All rights reserved. 14 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – limited companies Limited companies are always an incorporated business with a separate legal identity to the owners and shareholders. These legal formats are: private limited company (LTD). public limited company (PLC). limited liability partnership (LLP). community interest company (CIC). multi-national corporation (MNC). UK based limited companies must register with Companies House: Company registration - gov.uk © 2022 City and Guilds of London Institute. All rights reserved. 15 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – limited companies There are TWO styles of limited companies with slightly different structural formats and some points of similarity: Limited by shares Limited by guarantee Is a legal separate entity from the Is a legal separate entity from the people running it. people running it. Has separate financial arrangements Has separate financial arrangements from people running it. from people running it. Has shares and shareholders. Has guarantors and guaranteed amounts. Owners and shareholders can keep Profits must be reinvested into the any profits made after taxes are paid. company on behalf of all members. © 2022 City and Guilds of London Institute. All rights reserved. 16 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – private limited companies (LTDs) Private LTD companies can range in size from small to large businesses. The main features of an LTD company are: Format suits most types of businesses. Can be privately owned by one director. Potential shareholders must be invited to invest. Shareholders are often the founder, family and friends. Founders’/owners’ liability limited to value of shares. Cannot be publicly traded on any stock exchange. Files abbreviated accounts with Companies House. © 2022 City and Guilds of London Institute. All rights reserved. 17 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – public limited companies (PLCs) (2) PLCs are generally large businesses with many shareholders. The main features of a PLC business are: Must have at least TWO directors. Company secretary must be professionally qualified. Must have at least £50,000 worth of issued shares. Can offer shares to the general public. Must file full accounts with Companies House. Managed and run by a chief executive officer (CEO) and board of directors. © 2022 City and Guilds of London Institute. All rights reserved. 18 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Limited companies – advantages and disadvantages Advantages Disadvantages Personal liability is minimal, personal Must register with Companies House – assets are protected. more complex to set up. Can gain tax efficiencies for personal More costly to set up as limited and business activities. company. More credibility and trust with limited Accounts more complex, linked with company status. HMRC via software, filed annually. Company name is protected. Withdrawing money from company is more difficult. © 2022 City and Guilds of London Institute. All rights reserved. 19 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – community interest companies (CICs) (1) CICs were introduced by the UK government in the Companies Act 2006. Designed for social enterprises wanting to operate a business for a public good. A CIC is always a limited company. It can be limited by shares or limited by guarantee. If a limited by shares company, there is a restriction on how much can be paid in shareholder dividends to a maximum of 35% of net profits. If limited by guarantee, it has members not shareholders. Every member must guarantee to cover the company’s liabilities – usually a nominal amount limited to £1 each. © 2022 City and Guilds of London Institute. All rights reserved. 20 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – community interest companies (CICs) (2) Each CIC must identify an asset lock to support the social cause it sets up for. An asset lock guarantees that at least 60% of net profits goes to support its cause. How to set up a CIC Set out social objectives in a Community Interest Statement. Identify the cause or community supported by the CIC. Set out an asset lock promising profits to the cause. Set the company’s limits on shareholders’ dividends. Complete Constitution documents to legally form the CIC. Register CIC with Companies House. Apply to the CIC Regulator for approval. How to form a community interest company - gov.uk © 2022 City and Guilds of London Institute. All rights reserved. 21 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core CICs – advantages and disadvantages Advantages Disadvantages CICs have all the advantages of any CICs have all the disadvantages of other limited company – plus: any other limited company – plus: Access to other forms of finance, for No access to the same tax breaks as example grant funding. charity even if 100% social enterprise. Flexibility and familiarity with business Restrictions on dividends that can be structure for people running the CIC. paid to shareholders – asset lock. Continuity of social purpose even if Additional governance reporting to CIC founders have to leave. Regulator. © 2022 City and Guilds of London Institute. All rights reserved. 22 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – multi-national corporations (MNCs) (1) MNCs are companies with headquarters (HQ) located in their home country but operate in two or more countries. The main features of an MNC are: Very high value physical and financial assets and turnover. Sets high targets and generates substantial profits. Main business activities are production and marketing. Multiple offices in different countries manage activities. Management of offices in other countries controlled by HQ. Continuous expansion via overseas operations, mergers & acquisitions. Aim to sell every brand/product via huge advertising and marketing campaigns. © 2022 City and Guilds of London Institute. All rights reserved. 23 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – multi-national corporations (MNCs) (2) It is not enough to sell goods/services to other countries to be classed as an MNC. MNCs have to locate their business operations (production/marketing) in two or more countries. Main reasons for becoming an MNC: Glocalisation – adapt products to local markets. Gain access to more consumers internationally. Lower costs – production and transport close to markets. Avoid protectionism – trade barriers like tariffs and quotas. Overcome cultural barriers via local management and employment. © 2022 City and Guilds of London Institute. All rights reserved. 24 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – multi-national corporations (MNCs) (2) The commitment to becoming an MNC is a major undertaking. Locating business operations in several countries is never simple and does not always produce the expected results. Main reasons for NOT becoming an MNC: Globalisation: perceived as imposing HQs’ home culture. Diseconomies of scale with several production centres. Communications and logistics more complex and costly. Deeply ingrained attitudes to working practice difficult to change. © 2022 City and Guilds of London Institute. All rights reserved. 25 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – franchises A franchise is an established business with a success record that allows a third party to purchase the right to operate a business using its trade name. The original owner is the franchisor, who allows the third party – the franchisee –to run a duplicate business in specific area for a franchise fee and a percentage of the profits. The percentage payment of profits is known as a royalty fee and is paid every year. In exchange, the franchisee is allowed to use the branding, trademarks, marketing materials, systems and processes of the franchise. © 2022 City and Guilds of London Institute. All rights reserved. 26 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Franchises – advantages and disadvantages Advantages Disadvantages Franchisor provides full training for Must conform to the regulations set operating the business. out by the franchisor. Franchises have a higher success rate Limited decision-making powers when than start-ups. running the business. Can be easier to secure external Locked into a legally binding contract finance. for at least 5 years (on average). Brand recognition and ready-made Have to pay a percentage of profits in loyal customers for popular brands. royalty fees every year. © 2022 City and Guilds of London Institute. All rights reserved. 27 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – cooperatives (1) Definition: An autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. (International Cooperative Alliance 1994) Cooperatives based on the ethical values of: honesty. openness. democracy. caring for others. social responsibility. © 2022 City and Guilds of London Institute. All rights reserved. 28 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – cooperatives (2) A cooperative is a democratically run organisation that is open to everyone, owned and run by members for members. Usually, a trading business selling goods or services, generating profits that members decide how they should be used or distributed. It can be incorporated with liability limited by shares or guarantee. Or unincorporated, which means one or more members will have to sign contracts on behalf of the co-op and become personally liable for any debts it incurs. © 2022 City and Guilds of London Institute. All rights reserved. 29 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Cooperatives – advantages and disadvantages Advantages Disadvantages No restrictions on numbers of Limited start up capital – members pay members allowed. a nominal fee. Democratic management running the Potentially inefficient/untrained business. management. Service orientated towards members Conflict – disagreements/factions and community. among members. Stability – always someone to rely on Lack of motivation and incentives to to keep things operational. succeed. © 2022 City and Guilds of London Institute. All rights reserved. 30 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – charities (1) Definition: An organisation with the specific purpose, legally designated, to be charitable and exclusively for a public benefit. Charities are not allowed to earn funds from trading activities because that is not a charitable purpose. However, charities can have trading subsidiaries known as a charitable trading company – which is why there are so many charity retail outlets on high streets. © 2022 City and Guilds of London Institute. All rights reserved. 31 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Types of legal entities – charities (2) How to set up a charity 1. Identify a very specific ‘charitable purpose for a public benefit. 2. Find at least three trustees to support your charity. 3. Choose a unique name. 4. Create a Governing Document. 5. Choose a legal structure. – unincorporated trust – charitable incorporated organisation (CIO). 6. Register as a charity* with the Charity Commission. 7. Register with HMRC to be recognised as a charity for tax benefits. * Charities making less than £5,000 per year do not have to register with the Commission. © 2022 City and Guilds of London Institute. All rights reserved. 32 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Charities – advantages and disadvantages Advantages Disadvantages Tax benefits – no income, corporation, Complex initial setting up requires a lot capital gains or inheritance tax to pay. of commitment. Lower business rates than other types Founder can be voted out by the of organisations. Board of Trustees. Other funding opportunities, grants, Trustees not able to receive financial awards, etc. benefits (voluntary for no pay). Loyal, well-informed donors and Charities are highly regulated to volunteers believe in the cause. ensure public benefits goals are met. © 2022 City and Guilds of London Institute. All rights reserved. 33 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Summary – what we did Identified a wide range of legal entity types that organisations can form. Described the characteristics of each type and how to set them up. Compared the advantages and disadvantages of each legal entity type. Discussed the structure of each legal entity type and how they are governed. Considered potential reasons for selecting specific legal entity types for business such as incorporated or unincorporated businesses. © 2022 City and Guilds of London Institute. All rights reserved. 34 of 35 T-Level Technical Qualification in Management and Administration (Level 3) 300 Management and Administration Core Any questions? © 2022 City and Guilds of London Institute. All rights reserved. ‘T-LEVELS’ is a registered trade mark of the Department for Education. 35 of 35 ‘T Level’ is a registered trade mark of the Institute for Apprenticeships and Technical Education.