Chapter 19 lc business business organisations

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Chapter 19 lc business business organisations

  1. 1. Chapter 19Business Organisations
  2. 2. Key Areas• Which type of Business Organisation should be set up… – Sole Trader Generally asked to – Partnership distinguish between – Ltd Company these – Public Ltd company – Business alliances (last chapter) – Franchising – Co-ops• Why would you change between these?• State involvement in business D. Dempsey
  3. 3. Structures differ in terms of:• Formation & Dissolution• Ownership• Control Things to bare in mind• Management for question on Distinguish between• Finance different forms of• Profits ownership• Risk D. Dempsey
  4. 4. Sole Trader• Own & manage own business• E.g. hairdresser, mechanic, plumber etcFormation:- Easy- Register business name with Companies Reg office if different from your own nameMay require licence e.g. pub D. Dempsey
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  6. 6. PrintSole Trader Advantages Disadvantages Formation & Dissolution Easy to form Business dies with person Easily changed Ownership & control Single person Full control Management & Finance Quick decision making Long hours, few hols Account privacy Hard to raise all finance Little paperwork themselves Hard to be an expert at everything with no partner Profits & Risk Keep all profits take all risk (unlimited liability) D. Dempsey
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  8. 8. Partnership• 2-20 people in business together with a view to make a profit.• Formation- simple- Register business name & register with the Revenue Commissioners• Deed of partnership (recommended) – How much invested by each – How profits are shared – Salaries to be paid D. Dempsey
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  10. 10. PrintPartnerships Advantages Disadvantages Easy to form New partnership must be Formation & drawn up when partner Deed of partnership Dissolution leaves/dies Work shared among Disagreements Management & partners- less stress Delayed decision-making Finance Better decision making Harder to borrow than a Extra finance & expertise co. with new partners Synergy-sum of talent of Shared profits Profits & Risk partners exceeds their Unlimited Liablity individual contributions=greater profits D. Dempsey
  11. 11. Note… Changes in Business OwnershipPos Q structures by Businesses Reasons for change form Sole Trader to Partnership • New partners bring additional capital for expansion • New partners bring new expertise and skills to the business • Risks involved in the business are shared • Workload of a Sole Trader can be shared in a partnership D. Dempsey
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  13. 13. Limited Company• Businesses are owned by investors called shareholders who contribute money to a common fund called share capital• This money is used to finance the business.• Profits are shared among the shareholders in the form of dividends• Limited Liability-Shareholders only loose their investment if business goes bankrupt• LTD• PLC- shares freely bought & sold on stock exchange D. Dempsey
  14. 14. How are companies run? Shareholders elect Board of Directors recruit Managers runFinance Operation Personnel Marketing D. Dempsey
  15. 15. See Page 338 Private Limited Company • 1-99 • Limited Liability • “Ltd” • Own legal entity because of the business birth cert called… • Publish accounts • Voting…1 share = 1 vote…3 = 3 votes D. Dempsey
  16. 16. Forming a Private Ltd Company3 Documents…F A1, M o A, A o A Registrar of Companies office + legal fee Certificate of incorporation Statutory Meeting2010 Q2 poorly answered Ready to go! D. Dempsey
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  21. 21. PrintLTD Company Advantages Disadvantages Formation & Dissolution Co. Legally independent Setting up is complex & of owners, continue to time consuming exist after a death Ownership & control Owned by shareholders- easy & cheap to transfer ownership by sell shares Management & Finance Easy to raise finance by On-going paperwork selling shares Annual account audit Give shares to staff to help motivate them Annual report to CRO available to public Incorporated- Improves buss. image & credit worthiness Profits & Risk Limited Liability Profits shared among Profits shared shareholders D. Dempsey
  22. 22. Changes in Business OwnershipNote… Pos Q structures by Businesses Reasons for change from Sole Trader to Private Limited Company • The Business can raise additional finance for expansion from up to 50 shareholders • The business can gain additional expertise through new owners • The owners get all the protection of Ltd Liability • As a limited Company, the Business will find it easier to borrow from banks • The continuity of the Business is assured because if a shareholder dies, the company carries on D. Dempsey
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  24. 24. Co-ops 7 + members• A Co-Op is formed when a group of people pool their resources in capital, skills, and trade to improve their position by working together for their mutual benefit• Democratically owned & controlled by their members. Members may be workers, suppliers or customers. Each member has 1 vote irrespective of shares• Limited Liability• Producer Co-op-farmers or fishermen eg. Kerry Co-op who market & sell their produce• Worker Co-op- Workers pool their savings to start a business together eg Taxi firm• Credit Union D. Dempsey
  25. 25. PrintCo-op’s Advantage Disadvantage Formation & Equal voting More complex , time-consuming & Dissolution regardless of no. of expensive than sole trader or shares partnership. Difficult to cash in shares without member approval Management & One member= one Annual audit & annual return to Finance vote- CRO Easier to qualify for Difficult to raise finance grants & loans than sole traders & partnerships Profits & Risk Limited Liability Profits shared among members D. Dempsey
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  27. 27. Public Limited Company• At least 7 shareholders & no max no.• PLC shares can be freely bought & sold on stock exchange• Formation: starts off as a Private Ltd. Co. & applies to the stock exchange for a listing (quotation). D. Dempsey
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  29. 29. PrintPLC’s Advantage DisadvantageOwnership & Cheap & easy to transfer ownership Registering as a PLC complex &Control from one person to another time-consuming and costlyMgt & finance PLC have access to large amt of Must comply with Co.’s Acts. finance by selling more shares. Detailed info made public- Reward staff by giving them shares reduces confidentiality in the co. PLC’s attract more public Credit-worthiness improved attention Stock market quotation gives Easy take-over targets as prestige & status shares on stock exchangeProfits & Risk Limited Liability Many shareholders short term speculators & expect high dividends- a lot of pressure on directors D. Dempsey
  30. 30. Note… Pos Q Changes in Business Ownership structures by Businesses Reasons for changing from a Co-op to a PLC In recent years the biggest agri co-ops in Ireland have become PLCs (Kerry Coop, Waterford Coop, and Avonmore Coop) Waterford + Avonmore merged to form Glanbia PLC. Some reasons for this are as follows: • Coop model restricts the ability to raise capital, whereas the PLC has access to large amounts • Becoming PLC allows a business to raise equity. General public outside farming. • PLC status makes easier expansion into international markets • PLC status allows economies of scale and allow compete with large internationals on price • Formation of the PLC allows farmers the opp’ to realise their investment by selling their shares on stock exchange • Takeovers of other firms can be paid for through the issue of shares D. Dempsey
  31. 31. Franchising Is an agreement whereby a person is granted permission to produce a product or service to a proscribed formula in return for a fee. Thefranchisee may set up the business as a sole Trader,partnership or Ltd company. The Franchiser receives an initial fee and a % of profits or turnover from each franchise D. Dempsey
  32. 32. Benefits to Franchisee Disadvantages to franchisee• Ready made business • Initial Payment• Established business more • + Royalty likely to succeed than new • Loss of control, franchisor• Economies of scale in imposes restrictions to protect advertising, production, their name, product etc. purchasing etc • Unable to sell business• Guarantee of no competition without franchiser permission in specified area • Each franchisee must achieve• Standardised same standards as other product…customers know outlets what they are getting • Some outlets achieve bad rep• Ongoing training, Advice, for all outlets assistance with marketing, mgmt etc• Cost of buying franchise may be lower than setting up bus D. Dempsey
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  35. 35. Semi-State Bodies Ref : page 344 Semi-State bodies are often criticised for the following reasons:• Often accused of being inefficient• Usually heavily unionised and therefore employees are inflexible and resistant to change• Many are run at a loss and are therefore subsidised by the taxpayer• Many are poorly capitalised as there is only one shareholder: the state. Much of their capital is borrowed which leaves them highly geared• The may be very bureaucratic and therefore overly concerned with red tape and procedures• Some people feel that decisions taken by some semi-state bodies are often for political reasons, rather than in the best interest of the country/economy D. Dempsey
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