E1 the classification of the business according to its ownership and an explanation of the benefits and constraints of this type of ownership.
Business at work
Business ownership is a mixed economy of
The private sector is companies, which are owned by individuals and private organisations.
Sole proprietor (1owner)
Partnership (2-20 owners)
Private Limited company Ltd (2-unlimited number of shareholders). Public limited company Plc (2 unlimited number of shareholders) Franchising (owned by one or more franchisees)
Co-operative (owned by 2 or more co-operators)
This is the most common type of organisation and the easiest to set up. Examples of this type of organisation is freelance Internet web page designer, mobile hairdresser, a gardener, a small retailer, electrician or a plumber Advantages of this type of organisation, is that it is easy to set up and little capital is needed. The owner is the actual boss', makes all the decisions and gets to keep the profits. They get more of a personal relationship with their customers and a greater job satisfaction. Disadvantages of this type of organisation, is that it has unlimited liability and the owner could lose their home and other personal possessions. Their prices may not be competitive such as corner shops as they cannot buy in as much bulk as bigger stores like Sainsbury's causing them to charge more for their products. The owner is responsible for all the jobs and does not have specialised people for each department such a market research and finance. It also has a lack of continuity.
This is where they have around two to twenty partners. This allows them to share skills and the workload unlike the sole trader where only one person has the responsibility. Advantages of partnership is that they are easy to set up, they have more capital than the sole trader, they can share their skills to help the company work better and also share the responsibility of the workload etc.
Disadvantages of a partnership are that people can fall out over work. Normal partners do not have limited liability so they can rarely borrow large amounts of capital. Business decisions may be harder and slower as they have to consult each other. There may be disagreements about how things should be done, and profits would have to be shared. Partnerships are usually set up by writing out a deed of partnership' with a solicitor observing and suggesting how much each partner should put into the business, how profits and losses should be shared and the responsibility of the company etc.
Private limited company Ltd
Private companies tend to be smaller than public ones and are often family businesses. There has to be at least two shareholders but no limit to how many after that. Shares cannot be traded on the stock exchange and can only be bought by the permission of the board of directors. These are a committee which is set up to protect the shareholders interests. The members of the committee choose the managing director who is then responsibly for the running of the business on a day to day basis. Advantages of a private limited company are that they may find it easier to raise more cash by...