Choice of Business Format for a startup

1. Unit 3 – Enterprise in the Business World
This unit you will be planning a new business, writing a business plan and presenting
this in a professional format.
To pass the unit you will need to understand the importance of research in every
assignment you answer.

2. Time2Resources.co.uk
C.1 Choice of format
Learning aim C: Present a business model for
a business start-up
UNIT 1: ENTERPRISE IN THE BUSINESS WORLD
Do you want to set up a
business on your own or
would you like to share the
responsibility, and the
rewards, with one or more
other entrepreneurs? Are you
prepared to give up a share of
your business in return for
investment?
Time2Resources.co.uk

3. DEFINITION, FEATURES,
ADVANTAGES AND
DISADVANTAGES OF THE
FOLLOWING FORMATS:
• SOLE TRADER
• PARTNERSHIP
• LIMITED COMPANY
• PUBLIC LIMITED
COMPANY (PLC)
• SOCIAL ENTERPRISE
IN THIS TOPIC YOU WILL LEARN:
C.1 Choice of format

4. 4
What store am I?
•I am a British company, founded in 1919
•My first days sales were £4 with a profit of £1
•I opened my first store in North London in 1929
•I became a private limited company in 1932
•I became a public limited company in 1947
•In 1979 annual sales reached £1 billion for the first time
•By 1982 this had doubled to £2 billion
•In 1992 ‘Computers for Schools’ was launched
•In 1997 Terry Leahy became Chief Executive
•By 2010 I was a multi-national company with stores in China, Japan, the USA, Malaysia, Europe and
across the globe
•In 2020 Ken Murphy replaced Dave Lewis as Chief Executive
•I have the biggest UK market share in my sector
Why is it difficult for small and new businesses to compete?

5. Sole trader
Partnership
Private limited company
Public limited company
WHAT FORMAT WILL YOUR BUSINESS BE?
Social enterprise
You need to weigh up the advantages and disadvantages of
each option in order to make YOUR decision.

6. • A sole trader is an individual who owns and runs their own business
• The simplest form of business
Risks include:
• 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
SOLE TRADER
Advantages
• Cheap and easy to set up
• All profits go to you!
• Competitors can’t see
your accounts
• Highly motivated
• You are the boss!
Disadvantages
• Unlimited liability
• Limited finance
• Difficult to find cover
when ill
• Few specialist skills – the
owner has to do
everything or ‘buy in’
expertise

7. • A partnership is where two or more people run the business
• 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
Risks include:
• Each partner is equally responsible for debts incurred
PARTNERSHIP
Disadvantages
• 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
Advantages
• Risks and responsibilities
are shared
• More specialist skills
• Simple and flexible
• Competitors can’t see your
accounts
• Easier to raise finance than
a sole trader

8. • Private Limited Companies have Ltd. after the company name
• They can have one or more owners, these are called shareholders
• They must have at least one director (at least 16 years old)
• The shareholders are often family members and have a say in the running of the company
• Shares can only be sold to family and friends
• Incorporated businesses are legally registered as a company. This means that the owners are not liable for the
debts that the business incurs. Instead, they can lose the amount of money that they have personally invested
into the business, therefore they have limited liability
PRIVATE LIMITED COMPANY
Advantages
• Limited liability
• Increased sources of
finance
• More expertise available
• Difficult for hostile
takeovers to occur
Disadvantages
• Competitors can see
financial information
• Other shareholders have
to agree to a shareholder
selling shares
• Greater legal constraints
• Can’t sell shares to the
general public

9. • State 1 advantage of being a sole trader
• State 1 disadvantage of being a partnership
• State 1 benefit of being a private limited company
• What is meant by limited liability?
End
2 MINUTE TEST

10. • As a business grows an alternative type of business ownership becomes an option:
• Public Limited Companies (plc)
• This is more complex to set up and shares can be sold on a stock exchange
• This is an incorporated business
PUBLIC LIMITED COMPANY
Advantages
• Limited liability
• Flotation on the stock market
allows access to a larger pool
of finance
• PLCs tend to be large, stable
companies meaning it is
easier to access further
finance from banks
• Enhanced reputation of the
company due to its plc status
• The company gains exposure
through the Stock Exchange
Disadvantages
• Flotation is an expensive
process and not guaranteed
to be successful
• The general public can buy
shares meaning that the
company is open to
takeovers
• Financial information is freely
available for anyone to see,
including competitors
• Stricter rules and regulations
are placed on PLCs

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End
You have 30 seconds to write down as many businesses as you can think of with PLC
after their name, starting from NOW!
PUBLIC LIMITED COMPANY

12. • Not all businesses have a motive of profit
• A social enterprise will have a motive to do good for society as a whole or a smaller
community
• Surplus earned by the business will be used to support the cause rather than reward the
owners
• Examples of social enterprises are charities
SOCIAL ENTERPRISE
Advantages
• Sense of value for
entrepreneur
• Benefits society
• Attracts supportive customers
• Motivates workers
• May attract government
support
• Possible support / good deals
from suppliers
Disadvantages
• Entrepreneur’s time and effort
not rewarded by big financial
gains (but is this important?)

13. Hands up ....
• What do you know about your choice of business ownership?
13
WHAT FORMAT WILL YOUR BUSINESS BE?

14. You need to decide what format your
business start-up will be.
• Weigh up the advantages and
disadvantages of all appropriate
options in relation to your
business before reaching a
decision
• Explain why your chosen format is
the most suitable for you and your
business
1C.5 Outline the choice of format selected for a
business start-up.
?
2C.P5 Explain the reasons for the choice of format
selected for a business start-up.
?
Preparing for assessment