business legal forms of quit legal forms of business sole trader private limited company partnership...

BUSINESS BUSINESS

LEGAL FORMS LEGAL FORMS OF OF

QuitQuit

Legal Legal forms of forms of businessbusiness

SOLE TRADERSOLE TRADER

PRIVATE LIMITED PRIVATE LIMITED COMPANYCOMPANY

PARTNERSHIPARTNERSHIPP

FRANCHISFRANCHISEE

PUBLIC PUBLIC LIMITED LIMITED COMPANYCOMPANY

Toni’sToni’s

DEFINITION: A business owned DEFINITION: A business owned and operated by one person, and operated by one person, although they can employ staff although they can employ staff

Toni Morelli has decided to start a new business, which is an Italian restaurant. As he is the only owner, this makes him a SOLE TRADER. After a few months he has realised that there are advantages and disadvantages to being a sole trader which you can find out about by clicking on the red arrow



The ADVANTAGES are: There are few legal regulations when

setting up the business The owner (Toni) has complete control

over the business The owner has close contact with

customers Incentives to work hard i.e. he keeps all

the profits The owner can choose his holidays, pay,

breaks etc.


The DISADVANTAGESDISADVANTAGES are: No one to discuss business matters with The business has UNLIMITED LIABILITYUNLIMITED LIABILITY Hard to raise finance as there are no other

owners to put CAPITAL CAPITAL into the business The business is likely to remain small There will be a lack of specialist skills due

to the businesses size Lack of continuity in event of death,

sickness and holidays


If you’ve written down all the notes here are some challenges to test your knowledge.

Click here for multiple choice questions

Click here for essay questions and

other tasks

TRUETRUE

FALSEFALSETRUETRUE1. A sole trader can raise finance easily1. A sole trader can raise finance easily

2. Sole traders have limited liability2. Sole traders have limited liability

3. The owner will have to share profits3. The owner will have to share profits

4. This type of business is easy to set up4. This type of business is easy to set up

5. The business will grow quickly5. The business will grow quickly

6. There will be a lack of specialist skills6. There will be a lack of specialist skills

7. Sole traders can choose their holidays7. Sole traders can choose their holidays

8. There are a lot of legal regulations in 8. There are a lot of legal regulations in setting up the businesssetting up the business

TRUE OR FALSETRUE OR FALSE

FALSEFALSE

FALSEFALSEFALSEFALSE

FALSEFALSE

FALSEFALSE

FALSEFALSETRUETRUE

TRUETRUE

TRUETRUE

TRUETRUETRUETRUE

TRUETRUE

FALSEFALSE

DD

BB

CC

AA

What is a sole trader?What is a sole trader?

A person who sell soles

An individual who co-owns a business with employees

An individual who owns a business with and can have employees

A person who owns a shoe company

Questions

50:5050:50Internet Ask the

class

Lifelines

DD

BB

CC

AA

What advantage is there What advantage is there being a sole trader?being a sole trader?

The owner can choose his own holidays, breaks

Profits are shared

Money is easy to raise

Employees are paid less

Questions


class

Lifelines

DEFINITION: A group or DEFINITION: A group or association of between 2 and association of between 2 and 20 people who agree to own 20 people who agree to own and run a business togetherand run a business together

Toni offered his friend Marie, the chance to become a partner. They signed a PARTNERSHIP PARTNERSHIP AGREEMENTAGREEMENT which included details of the amount of CAPITALCAPITAL they invested and the way in which profits would be shared. After a few months, Toni realised there were advantages and disadvantages of a partnership, which you can find out about by clicking on the red arrow

PARTNERSHIPPARTNERSHIP


The ADVANTAGES are: Share expenses, responsibility and

decision making The owners have complete control over

the business More CAPITALCAPITAL is available to invest Individual partners can offer specialisms Continuity – partners can cover each

other’s absence


The DISADVANTAGESDISADVANTAGES are: Disagreement between partners The business is an UNINCORPORATED UNINCORPORATED

BUSINESSBUSINESS. If one partner died, the business would cease to exist

The business has UNLIMITED LIABILITYUNLIMITED LIABILITY The number of partners is limited to 20 One partner could be unreliable or

dishonest





other tasks

TRUETRUE

FALSEFALSETRUETRUE1. Partnerships can raise finance easily1. Partnerships can raise finance easily

2. Partnerships have limited liability2. Partnerships have limited liability

3. Profits aren’t shared in a partnership3. Profits aren’t shared in a partnership



6. There can only be up to 20 partners6. There can only be up to 20 partners

7. Expenses will be shared7. Expenses will be shared

8. The business partners have complete 8. The business partners have complete control over business matterscontrol over business matters


FALSEFALSE


FALSEFALSE

FALSEFALSE

FALSEFALSETRUETRUE

TRUETRUE

TRUETRUE

TRUETRUETRUETRUE

TRUETRUE

FALSEFALSE

DEFINITION: A company in which a DEFINITION: A company in which a number of shareholders (not more number of shareholders (not more than 50) contribute funds to the than 50) contribute funds to the company in return for shares. Shares company in return for shares. Shares can’t be sold on the Stock exchange.can’t be sold on the Stock exchange.

A year later after increasing profits further, Toni and Marie wanted to expand the business further but wanted to protect their private possessions from business creditors if the business failed. After seeking advice from their solicitor, they decided to form a Private Limited Company. This made the business very different from a partnership which you can find out about by clicking on the red arrow



The ADVANTAGES are: The business has LIMITED LIABILITYLIMITED LIABILITY Easier to raise CAPITAL CAPITAL than partnerships

or sole traders as shares can be sold to a large number of people (only friends or relatives)

Toni and Marie can retain control of the company if they don’t sell to many shares

Management is shared More specialisation can occur Continuity – the business will still exist if

one of the SHAREHOLDERS SHAREHOLDERS dies


The DISADVANTAGESDISADVANTAGES are: Expensive to set up Shares can’t be sold to the public Accounts have to be lodged with

Registrar of companies Less privacy as members of the

public can see them Shares can’t be sold without the

agreement of the other shareholders





other tasks

TRUETRUE

FALSEFALSETRUETRUE1. They can sell shares to the public1. They can sell shares to the public

2. These companies have limited liability2. These companies have limited liability

3. There are no shares in this company3. There are no shares in this company


5. The business will grow very slowly5. The business will grow very slowly

6. There will be a lack of specialist skills6. There will be a lack of specialist skills

7. Accounts can be seen by the public7. Accounts can be seen by the public

8. There are a lot of legal regulations in 8. There are a lot of legal regulations in setting up the business and is setting up the business and is expensiveexpensive


FALSEFALSE


FALSEFALSE

FALSEFALSE

FALSEFALSETRUETRUE

TRUETRUE

TRUETRUE

TRUETRUETRUETRUE

TRUETRUE

FALSEFALSE

DD

BB

CC

AA

What does limited What does limited liability mean?liability mean?

Shareholders are responsible for all the debts

Profits are shared

Shareholders are limited to the amount of money they can invest

Owners are only responsible for the amount of money invested

Questions


class

Lifelines

DD

BB

CC

AA

What does Ltd mean ?What does Ltd mean ?

Limited company

Public limited company

Large company Lifted company

Questions


class

Lifelines

DEFINITION: A company in which an unlimited DEFINITION: A company in which an unlimited number of shareholders contribute funds to number of shareholders contribute funds to the company in return for shares. Shares the company in return for shares. Shares can be sold on the Stock exchange.can be sold on the Stock exchange.

Toni and Marie were impressed with their large business and they increased profits dramatically by opening new restaurants around the UK. After a few years it was decided that they needed more CAPITALCAPITAL to expand the business into other countries. To do this they would have to change their company into a public limited company.

PUBLIC LIMITED PUBLIC LIMITED COMPANYCOMPANY


The ADVANTAGES are: The business has LIMITED LIABILITYLIMITED LIABILITY It is easier to raise finance as shares can

be sold on the Stock Exchange and there are no restrictions on selling the shares

Continuity – the business will still exist if one of the SHAREHOLDERS SHAREHOLDERS dies

High degrees of specialisation It is an INCORPORATED BUSINESSINCORPORATED BUSINESS


The DISADVANTAGESDISADVANTAGES are: The company is vulnerable to takeovers and SHAREHOLDERS SHAREHOLDERS receive some of the profit Annual accounts have to be published in full May have communication and management

problems due to size There are a lot of complicated legal issues

to overcome when forming and running a PLC





other tasks

TRUETRUE

FALSEFALSETRUETRUE1. They can only sell shares to relatives1. They can only sell shares to relatives

2. These companies have limited 2. These companies have limited liabilityliability

3. There are no shares in this company3. There are no shares in this company


5. The business could grow very quickly5. The business could grow very quickly

6. High degrees of specialism will occur6. High degrees of specialism will occur

7. Accounts can’t be seen by the public7. Accounts can’t be seen by the public

8. There are few legal regulations in 8. There are few legal regulations in setting up the business and is cheapsetting up the business and is cheap


FALSEFALSE


FALSEFALSE

FALSEFALSE

FALSEFALSETRUETRUE

TRUETRUE

TRUETRUE

TRUETRUETRUETRUE

TRUETRUE

FALSEFALSE

DD

BB

CC

AA

Which option is an Which option is an advantage of being a PLC?advantage of being a PLC?

PLC’s can raise finance easily

Owner keeps all the profits

PLC’s have sleeping partners

A PLC is cheap to set up

Questions


class

Lifelines

DD

BB

CC

AA

In a PLC, who owns the In a PLC, who owns the business ?business ?

Managers Employees

Shareholders Government

Questions


class

Lifelines

DD

BB

CC

AA

Name an advantage of Name an advantage of being a PLC?being a PLC?

Unlimited liability

Limited liability

Finance is difficult to raise

Only one owner

Questions


class

Lifelines

DD

BB

CC

AA

What is a holding What is a holding company?company?

A company that deals in the shipping industry

A company that saves money for companies

A company that supplies cover employees

A company that holds majority shares in businesses

Questions


class

Lifelines

DEFINITION: the granting by DEFINITION: the granting by one company to another one company to another company of the right to use company of the right to use it’s products and imageit’s products and image

Toni and Marie’s thought it would be a good idea to expand their company further by offering franchises to people. This would mean that they would become a FRANCHISORFRANCHISOR, and they would appoint FRANCHISEESFRANCHISEES to run restaurants under the name of Toni’s.This would provide benefits for both the company and the franchisees, which you can find out about by clicking on the red arrow

FRANCHISEFRANCHISE

FRANCHISEFRANCHISE

The ADVANTAGES to the Franchisor are: They can expand their business without

investing large amounts of money Risks are reduced because they are

shared with the FRANCHISEEFRANCHISEE Regular royalty payments are made Franchisees are usually more ambitious

and hard working than some employees Most franchised businesses are profitable Expansion is much faster

FRANCHISEFRANCHISE

The DISADVANTAGES to the Franchisor are:

The company’s trade name and reputation can be ruined

The initial high costs of the trial operation

On going costs of national advertising, training and support of franchisees

FRANCHISEFRANCHISE

The ADVANTAGES to the ADVANTAGES to the FranchiseeFranchisee are: Advertising and training is usually paid

for by the FRANCHISORFRANCHISOR The business has a greater chance of

success as the product will have a good brand image

Banks will be more willing to lend money to a FRANCHISEEFRANCHISEE

The FRANCHISEEFRANCHISEE benefits from continuous support from the FRANCHISORFRANCHISOR

FRANCHISEFRANCHISE

The DISADVANTAGES to the ADVANTAGES to the FranchiseeFranchisee are:

Less independence than a sole proprietor Continuous royalty payments to the

FRANCHISORFRANCHISOR May not be able to sell the business

without franchisor’s approval They could be tied into buying all

supplies, at higher prices from the FRANCHISORFRANCHISOR

FRANCHISEFRANCHISE




other tasks

FRANCHISEFRANCHISE

1. What is a sole trader?2. Name 2 advantages of being a sole

trader?3. Name 2 disadvantages of being a sole

trader?4. What type of liability does a sole trader

have?5. What is a partnership?6. What type of liability does a partnership

have?7. What is a private limited company?

FRANCHISEFRANCHISE

8. Name 2 disadvantages of being a LTD?9. What is a PLC?10. Name 2 advantages of being a PLC?11. What type of liability does a PLC have?12. What does this mean?13. What is a co-operative?14. What is a franchise?15. What grade do you want to get from

this unit?

TRUETRUE

FALSEFALSETRUETRUE1. A franchisor can raise finance easily1. A franchisor can raise finance easily

2. Advertising is paid by the franchisee2. Advertising is paid by the franchisee

3. The franchisee can sell anything3. The franchisee can sell anything

4. The business is likely to be successful4. The business is likely to be successful


6. There are less risks involved6. There are less risks involved

7. Profits are shared 7. Profits are shared

8. There company could get a bad name if 8. There company could get a bad name if franchisees run their restaurants badlyfranchisees run their restaurants badly


FALSEFALSE


FALSEFALSE

FALSEFALSE

FALSEFALSETRUETRUE

TRUETRUE

TRUETRUE

TRUETRUETRUETRUE

TRUETRUE

FALSEFALSE

DD

BB

CC

AA

What is a franchise?What is a franchise?

A completely new idea for a business

A large amount of money

A business set up under the image of a successful company

A business sector of the economy

Questions


class

Lifelines

Your answer is…..Your answer is…..

CORRECT!CORRECT!

Click here to go backClick here to go back

Go to the next Go to the next questionquestion

Your answer is…..Your answer is…..

WRONG!WRONG!


Try again!Try again!

Key term definition:Key term definition:

Unlimited liabilityUnlimited liability


“ “ the owner(s) of the business is/are the owner(s) of the business is/are responsible for all of the debts and responsible for all of the debts and

losses of the business”losses of the business”

For Toni this could mean that if the For Toni this could mean that if the business went bankrupt, he would lose the business went bankrupt, he would lose the capital that he put into the business and capital that he put into the business and

could also lose his personal possessions e.g could also lose his personal possessions e.g car, housecar, house

Write the definition Write the definition in your key-terms in your key-terms bookbook


Limited liabilityLimited liability


“ “ the owners (Shareholders) of the the owners (Shareholders) of the company cannot be held responsible company cannot be held responsible

for the debts and losses of the for the debts and losses of the company they own ”company they own ”

For Toni and the shareholders this could mean For Toni and the shareholders this could mean that if the business went bankrupt, they would that if the business went bankrupt, they would

only lose the capital that he put into the business only lose the capital that he put into the business BUT they wouldn’t lose their personal BUT they wouldn’t lose their personal

possessions e.g car, housepossessions e.g car, house



FranchisorFranchisor


“ “ A firm which allows a person to A firm which allows a person to trade under it’s name and to sell it’s trade under it’s name and to sell it’s

product for a fee”product for a fee”

For Toni’s business this would mean that For Toni’s business this would mean that people would have to pay royalty fees to people would have to pay royalty fees to

operate under the Toni’s nameoperate under the Toni’s name



FranchiseeFranchisee


“ “ An individual or business which pays An individual or business which pays another firm for the privilege of being another firm for the privilege of being allowed to sell its branded products”allowed to sell its branded products”

For other individuals/businesses this would For other individuals/businesses this would mean that they would have to pay royalty mean that they would have to pay royalty

fees to operate under the Toni’s namefees to operate under the Toni’s name



Partnership Partnership agreementagreement


“ “ This is the written and legal This is the written and legal agreement between business agreement between business partners. It is not essential for partners. It is not essential for

partners to have such an agreement partners to have such an agreement but it is always recommended”but it is always recommended”

For Toni and Marie this would be a written For Toni and Marie this would be a written contract concerning the running of the contract concerning the running of the

business business



Unincorporated Unincorporated businessbusiness


“ “ a business which doesn’t have a a business which doesn’t have a separate legal identity”separate legal identity”

For Toni and Marie this would mean that if For Toni and Marie this would mean that if one of them died then the partnership one of them died then the partnership

would end.would end.



Incorporated businessIncorporated business


“ “ a business which has a separate a business which has a separate legal identity”legal identity”

For Toni and Marie this would mean that if For Toni and Marie this would mean that if one of them died or any of the shareholders one of them died or any of the shareholders then the business would continue to exist.then the business would continue to exist.



ShareholdersShareholders


“ “ These are the owners of a limited These are the owners of a limited company. They buy shares which company. They buy shares which

represent part ownership of a represent part ownership of a company.”company.”

The shareholders of Toni’s will all have a The shareholders of Toni’s will all have a number of shares in the company.number of shares in the company.



CapitalCapital


“ “ the money invested into the the money invested into the business by the owners” business by the owners”

OROR

““goods such as premises, machinery goods such as premises, machinery and equipment that a business owns”and equipment that a business owns”Toni’s capital could be the money he’s put Toni’s capital could be the money he’s put into the business or the actual restaurant into the business or the actual restaurant

buildingbuilding


business legal forms of quit legal forms of business sole trader private limited company partnership...

Documents

business true

business capital

sole trader disadvantages

business matters

new business

type of business

business legal forms

holidays slide