Forms of Business, Business Regulation and Governance (Types of Ownership)

Types of Ownership

1. Sole Traders

2. Partnerships

3. Private Limited Companies (Ltd)

4. Designated Activity Company (DAC)

5. Public Limited Companies (PLC)

6. Co-operatives

7. Franchises

Sole Trader (1 person)

• A sole trader just registers as self-employed and registers a business name with the CRO.

• They have unlimited liability.

• The owner’s in full control of the decision-making.

• The owner is solely responsible for capital.

• It’s easy to set up, the owner keeps all profits.

• They have unlimited liability and no continuity of existence.

• They may go on to a partnership or private limited company to reduce liability or have access to more capital.

Partnerships (2-20 ppl)

• A Partnership Agreement takes place to outline ownership and duties.

• The owners have unlimited liability.

• Decisions are shared between partners.

• 2-20 partners can invest in the business.

• They don’t have to publish their accounts, they can share skills and expertise.

• They have unlimited liability and there’s no continuity of existence.

• May evolve to a private limited company for more investors or limited liability.

Public Limited Company (PLC) (On the stock market)

• They have to have 7+ shareholders, 2+ directors and register with CRO and submit reports.

• Has limited liability.

• They’re controlled by a ‘one share = one vote’ rule and there’s a board of directors who appoint a director/CEO.

• There’s unlimited capital since it’s on the stock market.

• There’s more access to capital and limited liability.

• Expensive to set up an maintain and there’s less financial privacy.

• A group of private investors may buy >50% of stocks making it a private limited company.

Co-operatives

• Democratically controlled and jointly owned by members for a common goal.

• They need 7+ members and to register with the Registrar of Friendly Societies to form.

• There’s limited liability.

• An elected (one share = one vote) committee runs the business.

• A limited amount of finance can be raised from members, and members receive a share of profits in proportion with turnover or percentage of savings.

• Members have limited liability, and is non-profit driven.

• There’s slower decision making and limited growth potential.

Franchises

• The franchisor gives the franchisee permission to sell products/services using their brand in exchange for a percentage of profits.

• The business idea has proven successful, the franchisee can learn from the franchisor and there’s already a customer base.

• Start-up costs are high, there’s less creativity and reputation can be damaged.