Understanding Business Structures. Types of Business Structure Sole Trader Partnership Limited...
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Transcript of Understanding Business Structures. Types of Business Structure Sole Trader Partnership Limited...
Benefits include:•Easy to set up and run•Only small amount of capital needed•Owner has total control and doesn’t have to share profits
Sole Trader Benefits
Drawbacks include:•Unlimited liability•Lack of economies of scale•The business relies on the owner 100%
Sole Trader Drawbacks
Partnership Benefits
Benefits include:•Shared responsibility•Allowing partners to specialise •Partners bring in more capital investment•Decisions, costs are shared
Drawbacks include:•Each partner has unlimited liability•Shared responsibility can lead to disagreements•Profits have to be shared according to Deed of Partnership
Partnerships Drawbacks
Limited Companies
There are two types:1. Private Limited Company (Ltd)2. Public Limited Company (Plc)
Private Limited Companies
Benefits include:•Company can raise more capital by selling more shares•Shareholders can keep control of the business
Private Limited Companies
Drawbacks include:•Accounts must be audited•Limited companies are more difficult to set up•Shares cannot be sold publicly on the stock market
Public Limited Companies
Benefits include:•Easy to raise capital for expansion by selling shares on the stock market•Economies of scale are better than a private Ltd company
Public Limited Companies
Drawbacks include:•Expensive to set up (a lot of capital is required)•Annual accounts must be made public•Anyone can buy shares – so it’s vulnerable to takeovers
Consumer Co-operatives…
…Are local Co-op shops owned by the customers…The profit is paid out or used to keep prices down
Franchises
• An existing company (the franchisor) lets someone else (the franchisee) use its business idea and name
• The franchisee buys a licence to carry out the business of the franchisor
• The franchisee must also run the business in the same way as the franchisor
• In return, the franchisor helps the franchisee set up the business
Business.govt.nz provides free access to a wide range of resources, including tools and interactive content. It acts as a gateway to government and private sector business information, news and services.Next steps:
Find out more with Business.govt.nz:
• Overview of business structures• Understanding business structures• Focus on sole traders• Focus on partnerships• Focus on companies