Business ownership
Part 1
.
1 2a
UK business ownership
Most businesses in the UK are privately owned.
This means:
 They are owned by private individuals
 These individuals risk their own money
 The owners’ reward is the profit they make.
1.2a Business ownership Part 1
Private ownership options

Sole trader – 1 owner

Partnership – 2 people or more

Private limited companies – often a family-run
business with the protection of limited liability

Public limited companies – large organisations whose
shares are traded on the Stock Exchange

Franchises – small business trading with agreement of
large firm

Cooperatives – collectively owned by
workers/customers
1.2a Business ownership Part 1
Key difference
 Sole traders and partnerships have
unlimited liability. Owners are responsible
for all debts and may have to sell
personal possessions.
 Companies have limited liability. Owners
can only lose their investment even if the
company has huge debts.
1.2a Business ownership Part 1
Sole traders
Benefits
Drawbacks

Easy to set up and give
a personal service


Unlimited liability
Owner independent –
can make quick
decisions

Capital may come
from savings
Minimum of paperwork

Needs business skills
Knows customers –
helps to avoid bad debts

Business ends on
death



Long hours, no cover
for holidays/sickness
1.2a Business ownership Part 1
Partnerships
Benefits
 Easier to raise capital
Drawbacks
 Unlimited liability




Profits are shared

Death of a partner
means share needs
repaying
Problems/ideas can
be discussed

Greater range of
skills/expertise

Cover for
holidays/sickness
May be disagreements
Decisions/actions
legally binding on all
partners
1.2a Business ownership Part 1
Key points about companies




Each company has its own identity in law.
The company employs staff, not the owner(s).
The company owns assets, not the owner(s).
The company operates until it is formally wound
up or goes into liquidation.
 The company pays corporation tax on its
profits.
1.2a Business ownership Part 1
Private limited companies
Benefits
 Limited liability




Minimum of 1 director
and 1 shareholder
Drawbacks
 Cannot sell shares to
the public

Easy to set up/affairs
still private
More regulations to
comply with

Easier to raise
capital/borrow from
bank
Accounting procedures
may be more costly

Death of shareholder
has no effect on
company
Share transfers need
agreement of all
1.2a Business ownership Part 1
Public limited companies
Benefits
 Limited liability

Increased capital as
public can buy shares

Minimum of 2 directors
and 2 shareholders

Shares increase in
value if company
successful

Operating large scale
can lower costs per unit
Drawbacks
 Many regulations to
comply with

Accounts (and
problems) are public
knowledge

Shareholders may sell
shares if dividends poor

Original owner may lose
overall control
1.2a Business ownership Part 1
Review of main types of private ownership
 Sole traders – suitable for one person running
small business with low risk/little investment
required
 Partnership – suitable for professional groups,
husband/wife businesses, small business
needing different skills
 Private limited company – suitable for family
business, essential if risk considerable, eg
through expensive stock
 Public limited company – suitable for large
national/international operations
1.2a Business ownership Part 1