This document discusses different types of business ownership structures including sole traders, partnerships, private limited companies (Ltd), public limited companies (Plc), and co-operatives. It provides details on sole traders, including that a sole trader is an individual who owns and runs their own business and has unlimited liability for any debts. It also discusses partnerships, noting that partnerships involve 2-20 people running the business where each partner is responsible for debts and shares in profits. The document outlines private limited companies, explaining they have limited liability for shareholders and must register with Companies House.

1. Business Ownership
•Sole Traders
•Partnerships
•Private Limited Companies (ltd)
•Public Limited Companies (Plc)
•Co-operatives

2. First, we must learn...
(un) Limited Liability
(un)incorporated
unincorporated
1 Legal entity
incorporated
2 Legal entities
Unlimited Liability
The owners are
responsible for all
debts
Limited Liability
The owners are not
responsible for all
debts

3. Business ownership
Soletrader
Partnership
ltd
Plc
Co-op

4. 1.4 Legal structure
Sole traders
• A sole trader is an individual who owns and runs their own
business.
• The simplest form of business.
• A sole trader has unlimited liability - they are personally
responsible for all debts run up by the business.
• They could lose their home and all of their assets to pay
off any debts that they are unable to pay.
Soletrader

5. 1.4 Legal structure
Sole traders
Benefits and disadvantages of being a
sole trader
Benefits
– Cheap and easy to
set up
– All profits go to you!
– Competitors can’t
see your accounts
– Highly motivated
– You are the boss!
Drawbacks
– Unlimited liability
– Limited finance
– Difficult to find cover
when ill
Soletrader

6. Choosing the appropriate legal
structure
1.4 Legal structure
Sarah has always dreamt of being her own boss and at the age of just
22 an opportunity arose. Patricia, the owner of the gift shop where
Sarah worked, was due to retire and close the business that she had
operated as a sole trader for over 40 years. Sarah wondered whether
she had the necessary skills to run the shop herself and finally plucked
up the courage to talk to her boss about her buying the shop.
Question Time
1. What is meant by the term ‘sole trader’. (2 marks)
2. Explain one advantage of Patricia running the shop as a sole trade
(2 marks)
3. Explain one disadvantage of Patricia running the shop as a sole
trader. (2 marks)
4. Identify and explain three skills Sarah would need to operate the
shop as a sole trader? (6 marks)
Soletrader

7. 1.4 Legal structure
Partnerships
• A partnership is where 2-20 people run the business
• Each partner is equally responsible for debts incurred.
• Each partner will take a share of the profits
• Each partner usually shares in the decision making.
• ‘Sleeping’ partners invest in, but do not run, the business.
Partnership

8. 1.4 Legal structure
Partnerships
Benefits and disadvantages of being
a partnership
• Benefits
– Risks and
responsibilities are
shared
– More specialist skills
– Competitors can’t see
your accounts
– Easier to raise finance
than a sole trader
• Drawbacks
– Unlimited liability
– Arguments can occur
between partners
– If a partner dies,
resigns or goes
bankrupt the
partnership is
dissolved
– Trust becomes a
significant element
between partners
Partnership

9. Limited companies
Ltd Plc
Only friends & family
can buy shares
Any member of the
public can buy shares

10. 1.4 Legal structure
Private Limited Companies
• Private Limited Companies have Ltd. after the
company name.
• They can have one or more members e.g.
shareholders
• The shareholders are often family members and
have a say in the running of the company
ltd

11. Starter
1. Spend 1 minute thinking of all the facts about one
type of business ownership (partnership / private limited
companies / public limited companies)
2. Spend another minute discussing with your partner
your type of business ownership
3. Feed back to the class

12. 1.4 Legal structure
Private Limited Companies
Private Limited Companies exist in their own right.
The owners and the company are separate legal entities.
Therefore, the company’s finances are separate from the owner’s
personal finances.
Shareholders are the owners of Private Limited Companies.
Shareholders have limited liability – they are not responsible for
the company’s debts.
Shareholders can only lose the money that they have invested in
the business in the form of shares.
ltd

13. 1.4 Legal structure
Private Limited Companies
Incorporation
Private Limited Companies must be registered (Incorporated) at
Companies House.
.
They must send to the Registrar of Companies the following:
1. A Memorandum of Association – name, registered office and what the
company will do
2. Articles of Association – the rules of running the company
They must deliver to Companies House each year a true and fair set of
accounts
http://www.youtube.com/watch?
v=CG2T7upUVAk&NR=1
ltd

14. 1.4 Legal structure
Private Limited Companies
Benefits and disadvantages of being a
Private limited company
• Benefits
– Limited Liability
– Increased sources of
finance
– More expertise available
– Difficult for hostile
takeovers to occur
• Drawbacks
– Competitors can see
financial information
– Difficult to sell shares for
individual shareholders –
other shareholders have
to agree
– Greater legal constraints
– Can’t sell shares to the
general public
ltd

15. Choosing the appropriate legal
structure
1.4 Legal structure
Sarah has spoken to Patricia about her idea of buying the shop and was
delighted by Patricia’s response. Patricia was thrilled to think the
business she had built up would continue to exist after her retirement
and started the process of valuing the business. That night Sarah told her
boyfriend Bobby of her idea. Bobby had just been made redundant and
offered to share the business with Sarah, thinking they could set it up
either as a partnership or a limited company.
Question time
1. What is meant by the term ‘partnership’? (2 marks)
2. What is meant by the term ‘limited company’? (2 marks)
3. Explain 2 advantages of Sarah accepting Bobby’s offer of sharing the business.
(4 marks)
4. Explain 2 drawbacks of Sarah accepting Bobby’s offer of sharing the business.
(4 marks)

16. Plc
• Any member of the public can buy shares in a
Plc.
End
OK, You have 2 minutes to find
out as much as you can about a
Plc

17. Co-Operative
Co-operatives are groups of people who agree to
work together and pool their resources.
End
OK, You have 2 minutes to find
out as much as you can about a
Co-Operative

18. Do you want to start a business?
The easiest way to start a business is becoming
a ____________. This is a type of business
ownership, when an entrepreneur ‘rents’ the
idea of a business from another company.

19. Franchises
• A franchise is when one business
(the franchisor) gives another person
or business (the franchisee) the right
to trade using its name and to sell its
products or provide its services
• The franchisee normally pays a
licence fee and a percentage of
profit to the franchisor
1.1 Starting a Business Enterprise

20. • Your task…
You are interested in becoming a subway
franchisee.
1)Explain why you want to become a
Subway Franchise (what are the
advantages)
2)What hesitations do you have about
becoming a Subway Franchise?
3)Where would you like to set-up your
Subway Restaurant. Why?
http://www.youtube.com/watch?v=vaTHDa5jqDI

21. Franchises
• Advantages
• Lower risk option
• Already established
• Recognised brand
• Help and support
• National advertising
and promotion
• Tried and tested
• Disadvantages
• Set up and running
costs can be high
• Share profit
• Reliant on others
• Less independence in
decision making
• Damage to brand
reputation
1.1 Starting a Business Enterprise

22. 1.1 Starting a Business Enterprise
Tessa runs a chain of three tea shops in the Lake District, each called
Tea Time Treats, followed by the name of the closest lake e.g. Tea
Time Treats in Windermere. The tea shops have built a up a good
reputation for fine quality teas and delicious home made cakes to eat
in or take away. Tea Time Treats is now featured in many tourist
guides for the area, always with rave reviews. Tessa is now keen to
expand the business and is considering offering the Tea Time Treat
name as a franchise.
Question time
1. What is meant by the term franchise? (2 marks)
2. Would Tessa be the franchisor or franchisee? (1 mark)
3. Explain two reasons why an entrepreneur might choose to buy
a franchise from Tea Time Treats (4 marks)

23. 2 Minute Test
• State 2 reasons why businesses exist
• State 2 sources of business ideas
• What name is given to a not for profit
business?
• What name is given to a gap in a market?
• State two reasons for starting a business
• State two advantages and two
disadvantages of a franchise
End
1.1 Starting a Business Enterprise

24. Your Task
• You need to make a poster, for ONE type of
business ownership. This poster must contain:
1. Definitions
2. Advantages
3. Disadvantages
4. Pictures / Diagrams