Btec Level 3 in Business, Unit 1 the Business Environment

Topics: Corporation, Limited company, Limited liability company Pages: 46 (18365 words) Published: June 21, 2012
Task 1 Describe the type of business, purpose and ownership of 2 contrasting types of businesses.

Sole Trader
A sole trader is a business owned by 1 person. It does not have limited liability meaning that if it fails and creates debts the owner is personally responsible for this. Sole trader’s usually have to work long hours and learn about all the aspects of business as many start up businesses cannot afford to hire people to take on other tasks. The owner is responsible for everything that goes on in the business and has to do a lot of work. The owner also receives all the profit and is able to make decisions on their own. The owner has full control over the business.

Hair dressers, small independent shops and book keepers are usually sole traders.

A partnership is a lot like a sole trader only there are more than 1 owner. This usually means the work and responsibility is shared and so are the profits. Good examples of partnerships are dentists, accountants and lawyers. There is usually more money and ideas that can be put into the business. There may be disagreements between partners and this can affect the way they run their business. Depending on what contracts were drawn up, one of the owners may decide to leave and leave debts to the other owner or owners. Each partner has to take the risk of full responsibility for the business.

Private Limited Company
A limited company is separate from its owner. This means if the company is sued or creates debts, they cannot take money from the owner. This means that an owner can only lose what they have put into the business and nothing more. A limited company is usually a fairly small business and has up to 50 shareholders. The amount of profit received depends on the amount of shares held. Decisions usually need to be agreed with by all shareholders. It can be hard to keep all shareholders happy. Shares are usually held by other people running the business and friends or family, it is usually easier to keep shareholders in a smaller private limited company then a public limited company.

Public Limited Company
A public limited company is owned by the shareholders and run by a board of directors and they nominate a managing director who over see’s the business. Decisions can take a long time to made and put into place.

A public limited company is different to a private limited company because the shares are sold on the stock market meaning anyone can buy shares. A PLC is usually a big company like Tesco’s, Asda and McDonalds. The board of directors have to make decisions based on what is best for the company but they need to work hard to keep their shareholders happy. If a company like this fails then a lot of people who own shares would be very unhappy as they would have lost their money.

CIC (Community Interest Company)
Forming Community Interest Companies (CIC) is the new and popular solution for small and medium sized Social Enterprise ventures. With less red tape than a full Charity registration, CIC is specifically intended for social and community enterprises They have limited liability the same as a private limited company and they run the same. Although their objectives are to make profit they also dedicate themselves to the local community and putting some of their profits back into the community. A CIC company can be limited by shares or limited by guarantee.

A franchise is when you buy the business model and branding of a well known business. For example McDonalds and Subway. Usually you have to pay a fee to start up the franchise as well as continuous fees depending on your profits. Franchisers do not have much control over the way the business is run, and what products they can sell. If the company fail’s then many franchisees would also go out of business, they would not be liable for the company's debts though. The only way you may limit your liability for any debts run up by the company, and...
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