Planning and Financing Business: Revision

Topics: Corporation, Stock market, Types of business entity Pages: 7 (1882 words) Published: September 30, 2014
Business Studies Revision
Unit 1- Planning and financing a Business
Section 1- Starting a Business
Topic 1- Choosing the right legal Structure
All Businesses fall under either the private sector or the public sector Within the private sector this would include sole trader and a partnership Within the public sector this would include PLC and LTD

Private Sector
Sole Trader
This is a business run by a business owner (entrepreneur)
Sole trader business is unincorporated (business and owner are one, no separate legal identity)e.g. owner is fined Newsagents, dry cleaners, small clothes shops, corner shops To set up a sole trader, you’d need to register the business at ‘company house’ and have enough finance. Advantages

Disadvantages
Retain profit
Unlimited Liability
Decision making is easy
Lots of work and long hours leading to health problems
Easy to set up (register and have enough money)
Large competition with bigger companies e.g. newsagents compared to Sainsbury’s local Various roles to take part in e.g. accountant, selling/ buying, marketing etc… No one taking some of the risks to share with you

Working for yourself can be motivating

Partnerships
This is when two or more people come together to set up a business A partnership also has unlimited liability
The common goal of a partnership to make profit.
They both have equal responsibility
Partnerships bring more people into the business and can also be a speciality

How to set up a partnership?
a) Register the name at the company house
b) You must draw up a partnership deed
-Partnership name
- Partnership term
-Partnership premises
-Assets of businesses
- Capital
-Partnership profits and losses
- Drawings
-Sleeping partner
- IN case of death
-Dissolve the partnerships
-Take on more partners

Advantages
Disadvantages
Can discuss ideas
Unlimited liability
Various tasks shared out e.g. specialists which leads to great effectiveness and increased costs Shared profit and losses, maximum of 20 partners
Easy to set up
Small company competing with larger ones
More money injected into the business as more partners join
Possibility for some tension within disagreements
Better decision making due to shared knowledge and expertise Continuity can be broken on the death of partner.

BOTH PARTNERSHIPS AND SOLETRADERS ARE UNINCORPORATED (DON’T HAVE A SEPARATE LEGAL IDENTITY Public sector

LTD
This is unincorporated and limited liability.
They are fairly small
Can’t sell shares to the public, however can be sold to family members and friends This company cannot be listed on the stock market
Advantages
Disadvantages
Limited liability- protects the personal wealth of the shareholders Greater admin costs
Easier to raise finance – selling of shares
Public disclosure of company information (annual report & accounts + annual return) Stable form of structure- continues to exist even when shareholders change Directors’ legal duties (set out by Companies Act)

More privacy of information than an public limited company

Plc
Also known as multinationals
Its incorporated and has limited liability
There needs to be a minimum of two people
Shares can be sold on the stock exchange market
Associated with big companies e.g. Royal mail, virgin, BA etc Setting up a PLC
Have a minimum of £50,000
Register name of business with companies house
Fill in memorandum of association
Fill in article of association
Send these back to the companies house
They will then send back a certificate of incorporation
Advantages
Disadvantages
Better access to capital
Once listed on a stock exchange, the company is likely to have a much larger number of external shareholders, to whom company directors will be accountable Liquidity - shareholders are able to buy and sell their shares (if they are quoted on a stock exchange) Financial markets will govern the value of the company through the trading of the company's shares, and will...
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