Big Question: The Private Sector has many different types of business structures in which entrepreneurs organise the factors of production to make goods and services for the economy.
Outline the main types of business structures and discuss the advantages and disadvantages of each structure.
Minimum of 200 words please and due in by Wednesday the 5th of December.
Any problems, please come and see me before next Wednesday
Mr Wickham.
Business structure
ReplyDeleteThere are many types of business structures that are different to either give the service or good in a different way or to form an organization of a bigger/smaller scale. We can present these types as such: sole traders, partnership and finally limited companies.
Firstly, the sole traders have an ownership which is 100 % dependent on the owner: no one else owns it, only the original and only entrepreneur. This kind of structure presents many advantages as the owner has a lot of personal contact with the staff and customers which may be very important in some businesses such as a local bar or restaurant. Another important advantage is that the owner has a total control on the decision making, gains all of the profits and is his own boss, which for many people is an extraordinary advantage. Moreover, this type of structure is generally smaller and therefore easier to control and set up as it requires less capital and legal formalities to set up. However, there is an unlimited liability as if, unfortunately the business becomes bankrupt, and the owner will have to pay all the debt even if it involves eviction from his own house. To add to this, he is responsible for everything, as he has no help with decisions, buying and selling, book keeping… this may cause a lot of disadvantage to jobs in this structure which are linked to the service sector such as hotels or traveling agencies, as it involves an endless amount of book keeping. Another reason is the limited finance, as to start up, you will need to spend a lot of money in buying everything, as you are starting from scratch, and also if you want to have more equipment or make your business bigger, you will have a limit of funds, which you will either need to take from bank loans or your own funds as with this you limit the growth of your business.
The partnerships are a simple way for a sole trader to expand their business by inviting other entrepreneurs into the business. This changes the structure to a partnership as there is more than one, and the partnership may go up to 20 individuals. On one hand, as there is more than one owner, there are many different skills brought up by different members, which benefits your business as well as decisions; as it is more probable to be successful on something when there is more than one person controlling and agreeing with it. As the finance in this structure is similar to the sole trader, it depends highly on the entrepreneur’s funds and bank loans, but as it now depends on up to 20 members, it is easier to obtain the quantity desired. The profits are shared and the control is also shared which is an advantage as someone who is better at one task may do that, while other does another completely different one, this is linked to the basic idea of specialization. On the other hand, in terms of the decision making, it is very difficult to agree with more than one person and it also may take you too much time making decisions which slows your business in some extreme cases. Furthermore, the liability is still unlimited, and if the business goes bankrupt, it depends on the funds of all of the partners. Also, the limit on the amount of capital of the partners means that there is a limit of finance.
The limited companies are divided into two sections; the private limited company, and the public limited company. We can make a distinction between both by looking at how the shares are sold. If they are sold exclusively to family or friends, they are private while, if they are sold in the stock exchange, they are public as every interested shareholder may have access to buy your share. Firstly, the private limited company has a limited liability, as the shareholders are only responsible for the amount that they initially invested, and they have a separate legal identity. Additionally, the shareholders have no management worries as they elect a board of directors to manage the business, and are controlled by the shareholders who meet at an annual general meeting. Though still, as the companies have to present their info.and present their records and annual accounts by law, many competitors may find it useful to look at your accounts ; such as the competition with apple and Samsung, as Samsung may see the type of technology used by Apple. The annual general meeting is an additional cost, which is a big back-down and may not be the best option or event at this time, during the economic crisis and also you need time and workers to be able to put everything together. As well the original owners may not control the business, as they have sold 100% of the shares but are a part of the board of directors, though this constantly changes which means that they could easily be replaced and you will be sent out of your own business! Another thing it that as the private limited companies have to pay a tax before the shareholders receive their dividends, and then, when they get paid they also must pay their own monthly tax, which means that the members must pay twice as much tax as other workers. Furthermore, the shares are sold privately, which means that they can only be sold to family and friends, which its finance is more limited and this affects the size of the businesses and that’s the reason why most are usually small/medium. The other types of limited company are the public limited company, it has some common advantages with the private one, such as having limited liability and shareholders have no management problems. The other advantages which are not common between this one and the private limited company are that on one hand, they sell the shares at the stock exchange which requires money and a minimum size scale to become part of it, and therefore most companies are private as they must gain lots of profit having a large business and must pay money to enter the “club”. Another advantage is that they advertise the sale of the shares, so it maximizes the interest and increases the financial potential of the company as you are open to a larger selling market in terms of share holders. On the other hand, there is a big expense on going public, as how mentioned before, to enter the stock market, you will need a certain amount of money. Also there is a divorce of ownership and control as the control is controlled by the board of directors, and the ownership is on the hands of the share holders and this “breaks up” the company into two and this makes it unable and complicated to communicate within the business. The last but not least of the disadvantages within this type of business structure is the management diseconomy as some grow too big which means that are difficult to control and for example, the board of directors controlling the business any not get on well with the owners or not communicate enough and this makes this structure weaker in the internal organization.
ReplyDeleteWe have seen from the arguments above that different structures have diverse disadvantages and advantages, but that is why these structures are so efficient and useful as each entrepreneur willing to form a business may chose one of these economies depending on their financial situation, profession and qualifications.
There are many types of business Structures that will vary according to how they are owned, managed and financed. In mixed Economies there are 3 main types of business organization, Private Sector Firms, Co-operatives and Public Sector Firms. The Private Sector Firms are sole traders, partnership and finally limited companies Which are then divided into Private Limited and Public Limited.
ReplyDeleteA Sole Trader consists of an individual that manages by himself his business. A big advantage of a Sole Trader is the high level of autonomy the owner has to run his business. There are no other owners to divide profits with, which allows a sole trader to use company funds in any manner. Sole traders have relatively few formalities to adhere to and very little regulation from federal, state and local government. However, a major disadvantage of a sole trader concerns the lack of liability protection for the business owner. This means a sole trader has a personal responsibility to pay every business debt and obligation.
A partnership of two or more individuals has the ability to collaborate. Partners can share the responsibility of managing the company and share ideas with other partners. Also, partners are not required to file income taxes as a business entity, meaning each partner reports his share of business profits and losses on his personal income tax return. On the other hand, a partnership offers no personal asset protection for partners of the business. A partner may be even liable for the negligent acts of another partner. If the partnership's business assets do not cover an obligation, a creditor may pursue a partner’s personal assets as compensation for the business debt.
A limited company is a business that is owned by its shareholders, run by the board of directors and most importantly whose liability is limited. Limited companies can either be private limited companies or public limited companies. A private limited company, although having no limit to the number of share holders it can have, may only sell its shares privately and it is therefore restricted in the amount of capital it can raise. In contrast, the public limited company can invite the public to buy its shares and therefore has the greater potential to raise the most capital.A private limited company is one where the liability is limited. Unlike a sole trader where the liability is unlimited, with a limited company the liability is limited to the value of the shares issued. This means that any debts are debts of the company and not of the owners. To form a limited company it must be registered at Companies House and the firm must have various legal documents including a Memorandum and Articles of Association. There need only be one director and they have to prepare annual accounts and submit them to Companies House. Private limited companies can range significantly in size. They may consist of a small family based business.Like a private limited company, a plc has shares, but the key difference is that these shares can be bought by anyone freely on a stock exchange. Ownership is therefore open to anyone who wants to buy shares. But on the other hand as there is an excess of owners the founder of the owner with the most actions might lose control of the company.
There are three main types of business organizations: Solo trader, Partnership and Limited companies. Each of them has advantages and disadvantages on how they are owned, managed and financed and some of them have subclasses, such as private limited companies and public limited companies. It is very important to choose the right business form to gain more profit.
ReplyDeleteThe Solo trader is the simplest business form that exists , only one individual manages by himself the business. The solo trader is not legal entity so only the owner of the business is responsible for its debts so it has unlimited liability. Another important disadvantage is the fact of decision making as all decisions must be made by the solo trader, so the success or failure of the business rests on one person. However , there are also some good things of being a solo trader like for example being his own boss, he can run and maintain full control of their business with no one telling him what to do. The main advantage is the fact that all profit goes to the owner and does not have to share with others and it requires less capital and legal formalities to start up.
Another type of business is the Partnership, it is a business form created automatically when two or more entrepreneurs join together to form a company. This could be formed when the owner of a solo trader invites another entrepreneur to join his factory and share it between the two of them. It is an agreement to jointly own, control and finance the business. The two main advantages are that the two or more entrepreneurs combine skills and knowledge to the business. As well as the extra help with decisions this could help in case of the company losing money. In the other hand, the two partners could disagree and have problems in decision making, they still have unlimited liability which means each partner could be held responsible for the actions of another entrepreneur.
Finally Limited companies are a business that is now owned by shareholders. In these businesses they sell the ownership of the business to raise finance to build the business; this is done through the scale of shares. The subclasses of Limited companies are Private limited companies and Public limited companies.
The advantages of Private limited companies are that the shareholders have limited liability so they are only responsible for the amount of debt up to the amount they originally invested, no management worries as they elect a Board of directors to run the business. The company has a separate legal identity, this protects it from debts and law suits which would only be payable from company funds. There are also many disadvantages like the disclosure of information to the public, this means that the company has to publicity the information so that other shareholders read what the other company is doing and the Annual general meeting(AGM). Also original owners may lose control and the company profits are taxed twice. Shares sold privately is also a bad point as shares can only be privately sold to friends, family or workers.
The Public limited companies are some of the world´s largest business structures with the most successful companies. The advantages of the public limited companies are the public sale of shares and the advertisement of the scale of shares. The disadvantages are the expense of “going public “ ,the divorce of ownership and control and the management diseconomies.
Of all the decisions you make when starting a business, probably the most important one relating to taxes is the type of legal structure you select for your company. Not only will this decision has an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise money. There are various types of Business structures: Sole Trader, Partnership and Limited companies.
ReplyDeleteA sole trader is a person who decides to start a business by trading on his or her own. Becoming a sole trader is the simplest way to get into business. In fact, if you woke up tomorrow and decided to start a business on your own, you would automatically be classified as a sole trader until you chose a different business structure by entering into a partnership or incorporating your business as a limited company. Being a Sole Trader takes out various advantages, as there can be a direct contact with staff and customers, and can encourage customer’s loyalty. Because there is no need to confer with other decision makers, sole traders can make decisions quickly and act on them swiftly, providing for the needs of their customers. Sole Traders maintain full control of their business. Running it how they please without the interference of others. This can be a very important advantage as for many people the best thing of being a sole trader is that you are your own boss. Another very important feature is that all of the profits go directly to the owner. Additionally, Sole traders take up less capital and legal formalities to start up. However being a sole trader also brings up various types of disadvantages; Sole traders are not seen as a separate entity by the law. Therefore, they are subject to unlimited liability. This means that the owner has to pay all the depts. In the worst case, this may mean a person risks their home, personal savings and any other assets they have both in and outside of the business. Moreover all decisions must be made by the sole trader. There is no room for help by others. So the success or failure of the business depends on one person. Lack of capital, limited finance options and little access to large funds which can limit the growth of the business.
A partnership is an agreement between two or more people to finance and operate a business. A simple way for a sole trader to expand is to invite other entrepreneurs into the business. This changes the structure from being a Sole trader into a Partnership, this structure can be up to 20 individuals. They combine their knowledge, skills and money, sharing all the profits. As in the case of sole traders Partnerships also bring up various advantages. A partnership may benefit from the combination of complementary skills of two or more people. There is a wider pool of knowledge, skills and contacts. There is a extra help with decision making, you don’t have to make all of the decisions by yourself. Additionally with more than one owner, the ability to raise funds may be increased, both because two or more partners may be able to contribute more funds and because their borrowing capacity may be greater. On the other hand becoming a partnership can bring up various disadvantages. Partners share the profits equally. This can lead to inconsistency where one or more partners aren’t putting a fair share of effort into the running or management of the business, but still reaping the rewards. Another important fact is the fact of Disagreement. Because the partnership is jointly run, it is necessary that all the partners agree with things that are being done. This means that in some circumstances there are less freedoms with regards to the management of the business. Especially compared to sole traders. However, there is still more flexibility than with limited companies where the directors must bow to the will of the members. Joint unlimited liability. General partners have unlimited liability which means each patner is responsible for the action of another partner.
Having a limit amount of partners(max 20) can also mean there is a limit amount on the finance new partners raise.
ReplyDeleteA limited company, also known as a limited liability company (LLC), is a type of business ownership that determines many aspects of the way the business is run. It shares some aspects with a privately owned company, some with a partnership, and some with a corporation. They are different structure of organization due to the fact that they sell their ownership of the business to raise finance to build the business. This is done by the selling of shares, which are now the new owners of the business, they are called the shareholders. The Board od Directors is appointed by the shareholders to organize the business. There are 2 types of limited companies:
Private Limited companies are closely held businesses usually by family, friends and relatives. Private companies may issue stock and have shareholders. However, their shares do not trade on public exchanges and are not issued through an initial public offering. Shareholders may not be able to sell their shares without the agreement of the other shareholders. There are various advantages of being a private limited company. The obvious advantage of a Limited Liability Company is the financial security that comes with business. As the Company’s shareholders will only be liable for any debt the company accrues according to the levels of their own investment and no more. This can provide a comfortable feeling of security for investors in the Company. Shareholders have no management worries as all of the worries are passed to the Board of directors as there would be too many shareholders to run the business. Another is that in law the company has a separate legal identity from its owners and thus protects them from debts and lawsuits which would only be payable from company funds, not their own! Private Limited companies also has a series of disadvantages as there are more complex and restrictive rules governing the accounts and bookkeeping of Limited Companies than sole traders (for example). The Company is expected to produce year’s accounts incorporating a double entry format, balance sheets and other notes. With the (generally) larger nature of a Limited Companies business this can be a time consuming and costly undertaking. The Annual General Meeting is an additional cost for the shareholders, as they are the moment where the shareholders can control the business and make any changes necessary in the Board of Directors.
When original owners assume positions at a Board of Directors and the new owners decide to make another Board of Directors they make the original owners into no control of the business. For Private Limited Companies, there is a restriction on the raising of capital via sale of shares. As mentioned, PLCs can gain further funding by the sale of shares, but this ability is lost to Private Limited Companies whose shares are restricted.
ReplyDeletePublic limited companies are some of the world’s largest business structures with the most successful companies. An example can be Exan Mobil Corp with the largest revenues of over $370 billion. There are several advantages of being a public limited company as it has access to a large scale of finance as shares are sold publically though a Stock Exchange. Advertisement can increase the possibilities of raising more money when selling shares. Although it has also various disadvantages; A PLC is normally a complex thing to start. The firm must hire an investment bank and a securities lawyer. The banker then offers the initial shares to the public. Often, the costs of setting up a public firm can run into hundreds of thousands of dollars. The prospectus is the document the company has to publish to inform how the business is running and how well is it going. Also going "public" means a certain lack of control by the founders of the firm. As there are so many share holders, the firm would be controlled by a board of directors. Finally when some companies grow too much and become difficult to ménage. One part of the company might not work well together. This is a slow decision making process. This is known as a diseconomy of scale
Business Structures
ReplyDeleteIn economies, there are many different types of business structures which can be grouped depending on how they are owned, controlled and financed. Private sector firms are owned by individuals and can range in size from small businesses owned and run by one person, to very large companies owned by thousands of people. These business structures are known as sole traders, partnerships and joint stock companies.
Sole trader is a type of business structure that is owned and run by a single person. This has quite a few advantages, as the sole trader is his/her own boss. All decisions are done by one person which is often a quicker and more dynamic process, and the sole trader doesn’t have to ask anyone’s permission before making a decision. Also, being your own boss and the only one running the business means that there is no one to share the profits with, and therefore all profits go directly to the sole trader. Another advantage is the business is a very personal one, so there will be direct contact with staff and customers and that can encourage customer loyalty and so gain the sole trader regular customers and possibly more customers. The owner will also be able to know what people want and so change what the shop sells to suit what customers wish to buy. It is also very easy to set up a sole trader business, as it requires much less capital and legal formalities which are involved in setting up larger businesses. However, there are some disadvantages. Being his/her own boss, the sole trader has unlimited liability, which means that the sole trader is liable to lose everything s/he has in order to pay off debts in the event of bankruptcy, and so therefore cannot share the debt with anyone else. Furthermore, being a sole trader means you basically have to be good at everything and do all the jobs by yourself. They have all the responsibility for everything, and so may have to work long hours and if they are ill there is no one to take over. Lastly, sole traders may lack capital. Expanding a business requires more money and sole traders often do not have this extra money. They have limited finance options, as bank loans are expensive and banks often do not lend money to sole traders as they often cannot afford to repay the loan, and they have little access to larger funds, which can limit the growth of the business.
Partnerships are another type of business structure that is a simple way for a sole trader to expand their business, by inviting other entrepreneurs into the business. Partnerships can involve up to 20 people and are an agreement to jointly own, control and finance the business. They combine their knowledge, skills and money and as such, they share all profits amongst the partners. An advantage of partnerships is that as the partner that joins the business will have new ideas and skill, and that can help to expand the business. Also, more partners means more money for the business, as finance is provided by the partners in exchange for a share in ownership, control and profits, and this money can also be used to expand the business. Another advantage is partners can help in decision-making, as a sole trader has to make all decisions by themselves, whereas in a partnership the person has help. Partnerships also have disadvantages. One disadvantage is how even though partners can bring new ideas, the partners may disagree with each other, and this may affect the growth of the business. Just like sole traders, partners also have unlimited liability, but it is joint, which means that each partner could be held responsible for the actions of another partner. This means that if one partner runs up a debt, the other partners may have to pay as well. Lastly, partnerships lack capital. The limit on the amount of partners means that there is also a limit on the amount of finance bringing in new partners can raise, and therefore very few large businesses in the world are partnerships.
Lastly, another type of business structure are limited companies. Limited companies sell the ownership to the business to raise finance to build the business, through the sale of shares. The individuals who buy these shares are called shareholders. A large organisation may have thousands of shareholders. A Board of Directors is appointed to run the business as there may be many shareholders who are paid through dividends. There are two types of limited companies: the Private Limited Company, which sells its shares privately; and the Public Limited Company (PLC), which sells its shares publicly on the Stock Market. The advantages on the Private Limited Company are that shareholders have limited liability, as they are only responsible for the amount of debt up to the amount the originally invested. Also, shareholders have no management worries as the Board of Directors run the company for them. Furthermore, the company has a separate legal identity from its owners and therefore the shareholders are protected from debts and lawsuits. Disadvantages of the Private Limited Company are that by law every year the company must produce annual accounts and records of its activities, and therefore disclose all its information to the public and other companies. Another disadvantage is the Annual General Meeting, where all shareholders attend and is an additional cost to the business. Also, as there are so many owners of the company, original owners may lose all control. Company profits in limited companies are taxed twice, and this is a problem for shareholders. Lastly, shares are sold privately, which can limit the growth of the business as there is no access to the larger finance from the use of Stock Markets to sell shares. Public Limited Companies also have advantages, like how selling shares publicly on the Stock Market can get you more money to finance the business. Also, Public Limited Companies can advertise the sale of their shares, which can maximise the interest in sale and increases financial potential of the company, and can attract many more investors. Disadvantages of PLC’s include the fact that it costs money to ‘go public’ or to start selling shares on the Stock Market, and there are many legal procedures to go through, like the Prospectus. Also, there is a divorce between ownership, the Shareholders, and control, the Board of Directors. Lastly, some companies grow so large it is very hard to keep them under control. This is called a diseconomy of scale.
ReplyDeleteBusiness Structures
ReplyDeleteIn the private sector, which is the one in which the government does not have a say, Has four main business structures which depend on who owns it, who runs it day-to-day and how it raises finance and its liability.
The first type of structure would be the sole trader a sole trader is a business that has only one owner which runs the business every day, but he may have employees and still be a sole trader. He must raise finance to work his business but he will only be able to do this using his personal savings or getting a bank loan, because if he sold shares he would become a different type of business. This also means that he is the only accountable person for debts and therefore has unlimited liability which means that he would have to sell anything he has to pay of any debts, like would be his house or car. This has many advantages like you being your own boss which may encourage you to work better or the fact that you can keep all the profit which is always a good incentive. On the other hand we have the disadvantages which are not few, like the overwhelming truth that you are alone and you alone must be able to run the business in finance, legal stuff etc. Also as a sole trader you will not be able to raise large finance simply because you are alone.
The second type of structure would be the partnership, but don’t be fooled by the name, in a partnership you can have up to 20 partners. This one is characterized by the bring in of new partners as owners who will greatly help in the business in several ways. One of the ways in which the new partners will help is in rising finance although they still have to do it through their savings and bank loan if you get twenty partners you will have twenty times more finance. Also the new partners will bring new skills and will be able to help in the parts in which they are best at. Last but not least the partners will be able to help you to take decisions. This last point leads us into the disadvantages because in the decision making part you could disagree and this could lees to trouble. Other disadvantages are that there is still a limit to you finance and all the partners still have unlimited liability but joint so this means that first the debt is shared amongst the partners and then each one must pay of his part selling whatever they have.
The third type of structure is the limited company; this company is special, why? Because it sells shares either privately or publicly. This means that we are going to have shareholders, people who have bought shares, but we are going to have many of these so they will not be able to run the company day-to-day so at the A.G.M (or annual general meeting) the shareholders will appoint a board of directors who will manage the company day-to-day. Advantages of this type of company are that shareholders do not have to manage the company the board of directors does that. The shareholders can’t be sued so if the company is found out to be cheating on the ministry of finance the shareholders are not legally liable for it. And the best part for shareholders limited liability if the company goes bankrupt the shareholders will only loose the money thy invested. The disadvantages of this would be that the company must make annual status reports and give them to the shareholders. Also profits are taxed twice when the company gets it and when the shareholders get it.
I said that there were four types but I have only mentioned three this is because the limited companies divide into private limited company and public limited company and the only big difference is that one sells shares privately to friends and family and the other one sells shares privately to the global public through the stock exchange.
Javier Silva
Business Structures:
ReplyDeleteIn the private sector there are many types of business structures, such as sole traders, partnerships, public and private limited companies and co-operatives and they all vary according to how they are owned, managed and financed.
Firstly, the smallest type of business structure is to be a sole trader, only one person is the entrepreneur, and gains all the profit as well as all the debts, called liability.
The advantages of being a sole trader are, firstly that its a really personal structure, you have direct contact with staff and is easier to encourage customer loyalty. another advantage is for example that you are your own boss, which means decisions are being taken quicker and more dynamic, as it is taken only by one person.One of the main advantages is that you own all the profits and specially that it is really easy to set up, because it requires less capital and legal formalities to start it up.
However there are some disadvantages, for example you are responsible for everything, you have no help with decisions, buying and selling and book keeping. Another disadvantage is that in contrast to getting all the profits you have unlimited liability, which means that the owner has to pay all debts in event of bankruptcy. Finally the last disadvantage is the lack of capital, you have limited finance options and little access to larger funds which can limit the growth of the business.
Another common type of business structure are partnerships, which is a simple way for a sole trader to expand, by inviting another entrepreneur into the business, Partnerships can be up to 20 people. Its an agreement to jointly own, control and finance the business. Combine knowledge, skills and money, and as a such they all share their profits. Typical examples are doctors, vets and solicitors.
There are many advantages of partnerships, such as you learn new skills, thanks to the partnerships. Another advantage maybe the increase of capital in contrast to being a sole trader, because finance is provided by the partners in exchange for shares in ownership, control and profits. Lastly the last advantage of partnerships is that you have extra help and knowledge with key decisions.
Furthermore there are also some disadvantages such as disagreements in important decisions which could make the business grow or not. Another main disadvantage is the joint unlimited liability, generally if the business went bankrupt, each partner could be held responsible for the actions of another partner. Ultimately the last disadvantage is the lack of capital, as there is a limit on the amount of partners there is also a limit in the amount of finance.
One of the main business structures in the world right now are Limited Companies, also called Joint Stock Companies. They sell ownership to raise finance, this is done by the sale of shares, bought by the shareholders, who are payed by dividends. With so many owners, a board of directors is chosen to run the company day-to day. There are 2 types.
ReplyDeleteFirstly, there are Private Limited Companies, which are more common and smaller then Public Limited Companies (PLCs). An example is Cargill. The advantages of Private Ltd Companies are, firstly that the shareholders have limited liability, they are only responsible for the amount of debt they originally invested, because I this wasn´t like this, there would be really little desire. Another great advantage is that they have no management worries, they have a Board of Directors, which can be changed at the Annual General Meeting (AGM) once a year. Finally another great advantage for the Private Ltd Companies is that they separate legal identity, the law has to separate legal identity from its owners and this protects them from debts and lawsuits.
However there are some important disadvantages, firstly the disclosure of information to the public, by law every company has to produce annual accounts and records, which can be useful for shareholders, but this information can also be used by competitor, to discover what type of technology the company uses and is an additional cost. Another big disadvantage is the AGM, when shareholders meet to make changes in the board of directors, however its an additional cost, again, furthermore a main disadvantage os that the original owners may loose power, most of the original owners take part in the board of Directors, but these might be fired in the AGM. One of the economical disadvantages is that the company profits are taxed twice, firstly with the corporate tax, before the shareholders receive it, and after they receive it they get taxed again. Finally the last disadvantage of Private Ltd Companies is that the shares are sold privately, shares can only be sold to family or friends, which limits the overall size of Private Ltd Companies.
Finally the last type of business structure, and of Joint Stock companies is the Public Limited Companies (PLCs). These are the largest business structures, with the most profit, for example. In 2006 Exon-Mobile Corp was the largest companies with revenues of over $370 billion. The advantages of PLCs are, firstly the public sale of shares, this means they have a larger scale os finance through the stock exchange, the largest ones are in New York, Tokyo and London. Finally the last advantage is that you can advertise the sale of shares, which maximises interest and increases financial potential of the company.
However there are some disadvantages for example, the expenses of going public, legal procedures to enter the stock exchange are really expensive, the prospectus is the key of entering to the Stock Exchange. Another important disadvantage is the divorce of ownership and control, as there are so many shareholders they have to organise the board of directors, which makes them lose control. Finally the disadvantage of PLCs is the management diseconomies, because of the size of the company, it becomes difficult to manage and therefore departments might to work well together, it loses efficiency.
Lastly the limited companies which they are also called joint stock companies. They are a different structure of organisations due to the fact that they sell the ownership of the business to raise finance to build the business. This is done through the sale of shares, with so many owners, a board of directors is appointed by the shareholders to run the business better. The new owners of the company are paid dividens from the profits made by the company.
ReplyDeleteThere are two types of limited companies, private limited companies and public limited companies.
The private limited companies are smaller size business but there are more of them. Some advantages are that the shareholders have limited liability, they are only responsible for the amount of debt up the amount originally invest. Shareholders have no management worries, the shareholders elect a board of directors to run the business, the responsibility is passed to the board which is controlled by the shareholders and accountable at annual general meetings. Another advantage is that they advertise the sale of the shares, so it maximizes the interest and increases the financial potential of the company as you are open to a larger selling market in terms of share holders. But on the other hand there are also some disadvantages there are annual general meetings it is an additional cost to stage these events for the shareholders. Also owners may loose control the positions can be taken away by the new owners who are the shareholders they might vote in a new board of directors and leave the owner with no control over business. Lastly shares can only be sold privately to friends, family and workers. There is no access to the larger finance from the use of stock markets to sell the shares so basically this limits the overall size of private limited companies.
Finally the public limited companies are some of the worlds largest structures with the most successful companies , public limited companies can raise for longer capital through a public scale of its shares, some advantages i public limited companies are the sale of shares advertisement can increase the possibilities of raising more money when selling shares. Some disadvantages are the expense of ´going public´, the divorce of the ownership and control as there are so many shareholders they have to organise the board of directors, which makes them lose lots of the control. And lastly the management diseconomies.
Paula Garcia 10N
apologies for posting this late. I did not have access the internet yesterday.
ReplyDeleteBusiness Structures
There are three main business structures in the Private sector – sole traders, partnerships and private & public limited companies. These are all run in different ways.
To begin with, a sole trader is a business owned and controlled by one person. It is the oldest and most popular form of business organisation and many of today’s largest companies started off as sole traders many years ago. A sole trader may employ other people but will only ever have one owner. This business structure has both its advantaged and disadvantages. The advantages are that a sole trader is his or her own boss. This is a good thing as when it comes to decision making he/she does not need permission to consult their other colleagues to carry out decision making. Another advantage is that the sole trader can choose his working hours which would fit in well with their personal life. The sole trader receives all profits the company makes and finally, a sole trader is an easy business structure to set up. Sole traders also had disadvantages when it comes to building up a company. First of all one of the main problems is that the owner has full responsibility for the business (unlimited liability) if something was to go wrong the owner would have to take complete responsibility for it. If the owner if off sick or on holiday it is likely to lose revenue. When sole traders start off they usually lack capital which makes it harder to allow the business to grow, banks tend not to give out a loan to them as they cannot afford to pay the money back.
Another type of business structure is a partnership. A partnership is an agreement between two or more (up to 20 people) to run a business. Partnerships sometimes originally start of as sole traders and become partnerships by raising additional finance and expanding the business. Partnerships are legal agreements between two or more people to own, finance and run a business and all profits made need to be split between the partners. Partnerships are popular among professions including solicitors, doctors, accountants and vet nary surgeons. Most partners are general partners who share unlimited liability the same as sole traders. Like sole traders partnerships have their advantages and disadvantages. They are easy to set up and having more partner’s means that the partnership can earn more capital, also, new partners joining the company may bring new skills and ideas helping the company grow and finally, partners share responsibility for decisions made. Partnerships, like all business structures also have their disadvantages. Being in a partnership means that you are working with up to 20 people and ideas put forward means that people could disagree. General partners have unlimited liability which means if something goes wrong partners may need to put forward their own money to pay of any debt.
Finally, the final business structure I am going to talk about is a joint stock company. Joint Stock Companies sells shares to raise money to finance their organisations. They are also known as limited companies. Shareholders are the owners of limited companies. Each share purchased in a company receives a share of its profit. This profit is a dividend. Large limited companies have many shareholders. All the shareholders elect a Board of Directors to run the company. The board of directors a chosen by the shareholders voting. Within limited companies there are Private Limited companies and public limited companies (PLC). Private limited companies only sell shares to people known to existing shareholders. In Private Ltd’s shareholders only have a limited liability and as shareholders they get to vote in a board of directors to manage the company. PLCs sells shares on the stock market unlike in private limited companies. PLCs also have a board of directors to manage the company.
[Sorry Mr. Wickham, the network failed until today]
ReplyDeleteTo run a business, a entrepeneur in a mixed economy can choose a structure which are distributed in three main types of business organisations: Private Sector Firms, Co-operatives (workers co-ops, consumer co-ops) and Public Sector Firms (central government, local govt, govt agencies). In this case, in a Private Sector Firm, there are four types of structures:
The first option is to be a 'Soletrader'. This type of structure makes the entrepeneur his/her own leader, he/she can get all the profits from the business, this is personal, which means there is a direct contact with staff and costumers, and this structure is easier to set up, as it requires less capital and formalities to set up, and it's also good for health as you do not get pressure from superiors. These could be some of the advantages, but in the other hand, there are disadvantages. The soletrader needs to be responsible for everything, as he/she has no help for actions like decision making, etc, he/she has a unlimited liability, which is a big disadvantage because you need to pay all debts, and when you cannot pay back, the bank can take things you own like houses, cars, etc. There is also a lack of capital for the soletrader to expand his business.
When being a soletrader, sometimes you need some help with decisions, problems, etc, then you can invite other entrepeneurs and create a 'Partnership'. This is a structure which can have up to 20 individuals. Now it is easier to make decisions, as there are more people that provide advices and help. The partners could also bring in new strategies and knowledge to the business. The capital would also increase as the partners would bring their money into the business. But this structure also has inconveniences: When making decisions, instead of providing help, the partners could disagree with the decision made, and this would cause infightning and problems and would affect the running of the business. Although other partners bring in more money, there could still be a lack of capital for the growth of the business, as there is a limit on the amount of finance depending on the number of partners. There is also a Joint unlimited liability, which is similar to the unlimited liability in the structure of 'Soletrader': The partners are responsible for each others actions, this means , for example, if your partner cannot pay back his debts, you must be responsible for this, so the bank could also take your owns. Other examples of disadvantages could be that you cannot take all the profits, you are not the only boss, etc.
A totally different structure is 'Limited Companies', also called 'Joint Stock Companies'. This structure is divided in two other structures, but these share some common characteristics. They both raise the finance to build the business by selling the ownership of the business, which is done by the sale of Shares. The individuals that buy these shares are called shareholders, and they become the new Owners of the business. When there is too many owners, they elect a 'Board of Directors' to control and run the business day-to-day. The shareholders are paid by dividends, which comes from the profits made by the company. Limited Companies could be Private Limited Companies or Public Limited Companies(PLC).
ReplyDeleteThe Private Limited Companies are smaller sized businesses, but they are more than Public Limited Companies. The abbreviations for this type of company are different in every country: In the UK it is Ltd, in USA it is L.C. or Ltd Co, and in Spain it is S.L. As like other structures, this structure also has advantages and disadvantages. Firstly, the advantages: the shareholders have a Limited liability, totally different from being soletrader or partnership, this means the shareholders are only responsible for the original amount of money invested to the company, if they lose all that money, they do not need to give out the owns. Share holders have no management worries, as the Board of Directors will control everything, and there is an Annual General Meeting (AGM), in which the responsability is passed to the Board and held accountable. There is also a Separate legal identity, this means that the company has a separate legal identity that protects the owners from debts and lawsuits, this means that they do not need to pay those from their own, but from the company. The are also disadvantages: the company needs to publicly show the information of the company, which is useful for shareholders , but, on the contrary, it also provides information to the competitors. The original owner, the one who started the business, could lose the control of the company. The company profits are taxed twice, this means that before the shareholders receive their dividends, the corporate tax is firstly paid on its profits, and then the dividends are taxed again as the personal income of each shareholder. The shares are also sold privately, they can only be sold to friends, family and workers. Some examples of Private Limited Companies are HCL Technologies Ltd, Nestle Ltd,...
The Public Limited Companies (PLC) includes some of the worlds largest business structures with the most successful companies. The abbreviantions are also different in every country: In the UK it is PLC, in the USA it is Corp / Inc , and in Spain it is S.A. A big difference between PLCs and Private Limited Companies is the way to raise its capital: how it sell its shares. PLCs can sell its shares through a Stock Market. When we say a company is going public or getting a public listing, it means that a company is becoming a PLC. This public sale of shares is one of the advantages. Another advantage is advertising the sale of shares, the company can rise the financial potential of the company by advertising on newspapers, magazines, etc. In the other hand, the disadvantages: In this structure, the original owner also loses the control of the company. The management diseconomies: when the company grows too big, some parts of the company might not work well as there are too many departments, this could cause problems like a slow decision making,... This is called a diseconomy of scale. The is also the expense of 'going public': There are many things that can be very costly to the business, like the procedures and checks from the Stock Exchange, so the company needs to create a document (usually a document or in newspapers) called 'The Prospectus'. Examples of PLCs are microsoft, apple, bank of america, ....
Well done everyone.
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Cristina A*
Excellent answer.
Pepe B+
Very good answer. You could have discussed Sole Proprietor and partnerships with a little more detail (advantages/disadvantages).
Diego B
A good answer. You could have used more detail(advantages/disadvantages).
Carlos A*
Excellent answer with good use of the material and examples.
Patricia A*
excellent answer.
Javier B+
A very good answer, but you rushed your final explanation of limited companies. Give examples where you can.
Marta A*
Excellent answer with good use of examples.
Paula A*
Very good answer, please include examples to get the highest marks.
Sophie B
A good answer. You could have written more about limited companies and try to give examples.
Lily Liu A*
An excellent answer.
Not on blogspot:
Sonia A*
Excellent answer
Maggie B+
Very good, but needed more detail about Limited companies and give examples please.
Andrea B+
Very good, but needed more detail about Limited companies and give examples please.
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