4 Types of business organisations

Advantages of being a sole trader \[6\]

* Few legal regulations
* No boss
* Freedom to choose schedule, prices, and employees
* Close contact with customers
* Motivation to work harder for more profit
* Can keep business matters private

Disadvantages of being a sole trader \[4\]

* No benefit of limited liability
* No other investors to put in capital + investors are reluctant to loan to smaller businesses
* Business is not likely to grow due to capital restrictions
* no other owner to take control when needed
* Unincorporated, no continuity after death

Sole trader businesses are best for: \[3\]

* people who are setting up a new business
* businesses that do not need much capital to get started
* Businesses that will be dealing mainly with the public

Advantages of a partnership \[3\]

* More capital will be invested into the business (compared to sole trader)
* Responsibilities are shared. Risk is dispersed
* Partners are motivated to benefit from the profits

Disadvantages of a partnership \[5\]

* No benefit of limited liability
* Unincorporated, no continuity after death
* Disagreements among partners can result in conflict
* if one partner is inefficient or dishonest then the entire business suffers
* Most countries limit the number of partners, leading to a limit in capital

partnerships are best for: \[2\]

* people who want to form businesses with little legal complication
* Where all the partners are well-known to each other such as family

Advantages of a private limited company \[3\]

* Shares can be sold to a large number of people → much larger sums of money to invest in the business
* All shareholders have limited liability
* The people who started the company are able to keep control over the business as long as they don’t sell too many shares

Disadvantages of a private limited company \[4\]

* Significant legal matters (The article of association (Rules, rights and duties of all directors), and The memorandum of association (information about the company, objectives # of shares, etc)) → a certificate of incorporation will be issued by the Registrar of companies
* Shares cannot be moved from one person to another without the agreement of the other shareholders
* Accounts of the company are less secret (when compared to sole trader and partnership)
* The company cannot offer its shares to the general public. e.g. cannot be put on the stock market.

Advantages of a public limited company \[5\]

* It has limited liability
* It is an incorporated business
* opportunity to raise very large sums of money due to no restriction to possible shareholder pool
* no restriction on the buying, seeling, or transfer of shares
* A public limited company often has a high status

Disadvantages of a public limited company \[4\]

* The legal formalities of a plc is complicated
* There is much more regulation and control over PLCs to protect shareholders
* Selling shares to the public is expensive
* High change that the original owners lose control via selling too many shares

Advantages of franchising to the franchisor \[4\]

* The franchisee buys a licence from the franchisor to use the brand name
* Expansion is faster
* Responsibility is all on the franchisor
* all the products sold are controlled and supplied by the franchisor

Advantages of franchising to the franchisee \[6\]

* Chances of business failure is much lower as it’s already a well-known brand
* the franchisor pays for advertising
* All supplies are obtained from the franchisor
* There are fewer decisions to make as most

Disadvantages of franchising to the franchisor \[2\]

* Poor management of one of the outlets could lead to a bad reputation for the whole business
* The franchisee keeps the profits from that outlet

Disadvantages of franchising to the franchisee \[3\]

* Less independence when compared to running to a non-franchised business
* Unable to make decisions that may fit the local area better
* Licence fees must be paid to the franchisor as well as a percentage of annual turnover

Advantages of joint ventures \[3\]

* Sharing of cost
* Local knowledge
* Risks are shared

Disadvantages of joint ventures \[3\]

* Profits must be shared
* Possibility of disagreements
* different sides might disagree on ways of running a business

Advantages of public corporations \[3\]

* If industries are controlled by monopolies then it being owned by the government would ensure people are not taken advantage of
* It can save important businesses from failing
* Important programmes such as tv and radio can be made free for the public instead of private companies taking advantage of them

Disadvantages of public corporations \[4\]

* There are no private shareholders to insist on high efficiency. profits may not be as high
* government subsidies may lead to inefficiency as managers think that the government will always help if they make a loss
* there is no close competition between public corporations
* governments can use the business for political reasons