Different Types Of Campanies
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Business Studies
Sole Trader – Advantages
Own Ideas
Initiative
All the profit
Easy to set up
Decide who to hire
Keep accounts private
Choose your own name
Personal style of management
Take own holidays
No share holders
Minimum politics
Sole Trader – Disadvantages
Increased risk
Responsible for your own actions
Capital requirement
Increased pressures
More isolated
Reduced support
More expensive
Being a sole trader is the easiest way to set up your own business, you will need to write up a business plan showing you have thought about your market this means if your product will succeed in your selected location. An example of a sole trader would be an Ice-Cream man, or a florist. These two examples are sole traders because they are self employed and do not need to hire many employees as they would not get that many customers, they also do not have any share holders which means total control. In a sole trader company, it would involve just the one owner, and he would work for himself, therefore gaining all the profit. A sole trader does not have a large market as it is only a small firm and cant afford to keep up with all the latest marketing ways.
Partnership – Advantages
Less expensive
Shared risk
More support
Less pressure
Debt shared equally between all owners (advantage if you put more money into the company)
Partnership – Disadvantages
Less power
Shared ownership
Debt shared equally (disadvantage if you own less)
Benefits shared
Less profit
An example of a partnership could be a dentist, or an engineer. For a partnership to be formed you will need two to twenty people involved in the company. By being involved this means investing in the company and helping out in the work load. First you will need to prove to the bank that you will eventually be able to pay back loan by providing a business plan showing your location and market is good and you will be making earning enough to make a profit and therefore pay back the bank. The size of a partnership would be small but larger than a sole trader. There market would be larger and they would need to hire some staff but not many. The profit made by the company would be split depending on how much each co-owner owns, the owner who put more money in would get the greater profit. Although the most powerful owner gets most of the profit and more power, the debt would be split equally among all of the owners.
L.T.D – Advantages
Shares can only be sold to friends and family
Widespread support
More investment opportunities
Better cash flow
More financial strength
L.T.D – Disadvantages
Less control
More dependable on others
Responsible to shareholders
More dependent
on others
Not as easy to get your own way, there is other peoples ideas to consider
Increased cost
An example of a L.T.D would be Chelsea football club, this is a L.T.D as the current owner has bought all of it and so there is one owner. This company would be very large, world wide even. It would also hire within the thousands as the company is so big. Due to the size of the company there marketing would be a major part in the companys profit, as there is so much competition they will need to keep up with the latest marketing ideas. The profit would go to the single owner and all the people who have bought shares in the club. For you to be the single owner you would need to completely buy the whole organization, for example “Abromovic” with Chelsea Football Club, but this does not mean total power as there will be many share holders to answer to.
P.L.C – Advantages
Widespread support
More investment opportunities
Better cash flow
More financial strength
Less cost due to share holders
P.L.C