Types of ownership

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Business Mind Map on Types of ownership, created by abbieralphs on 04/24/2014.
abbieralphs
Mind Map by abbieralphs, updated more than 1 year ago
abbieralphs
Created by abbieralphs almost 11 years ago
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Resource summary

Types of ownership
  1. sole trader
    1. definition: running a business by yourself with unlimited liability.
      1. advantages: easy to set up & give a personal service
        1. owner independent- quick decisions made
          1. less paper work
            1. knows customers- helps to avoid bad debts
            2. disadvantages: unlimited liability
              1. longs hours, no cover for holidays/sickness
                1. capital may come from own savings
                  1. business ends on death
                2. partnership
                  1. definition: business run between 2-20 people
                    1. advantages: decision making, work load, profit & liability are shared=responsibility
                      1. individual partners specalise in an area in which they have skills/expertise
                        1. work of a partner can be covered
                          1. able to access more funds
                          2. disadvantages: unlimited liability
                            1. limited access to finance
                              1. disagreements
                            2. franchise
                              1. definition: a agreement that allows you to but the rights to operate your business in the style of an existing business
                                1. advantages: operating under name of a major franchisee gives them a greater chance of success
                                  1. many fanchisers provide national or local advertising & training
                                    1. bulk purchasing (discounts)
                                    2. disadvantages: success of the business dependent on the success of the franchisers product
                                      1. little control over areas; product development
                                        1. liability to pay a continuing annual fee/royalty
                                          1. dependence on the franchisee for success
                                        2. private limited company (LTD)
                                          1. definition: the owners are the shareholders and their ownership of the business is determined by the proportion of total shares each person holds
                                            1. advantages: access to funds through the issue of shares
                                              1. stable form of business structure
                                                1. limited liability
                                                  1. incorporation means the business exists even if the owner dies
                                                  2. disadvantages: banks may see it as a risk
                                                    1. complicated set up process
                                                      1. limited liability as a risk
                                                    2. public limited company (PLC)
                                                      1. definition: shares are bought and sold publicily
                                                        1. advantages: funds can be raised from a flotation
                                                          1. future founds can be raised because banks see this as a stable structure
                                                          2. disadvantages: flotation process is expensive
                                                            1. its not possible to control who owns the shares in a PLC as the shares are traded publically
                                                              1. theres nothing stopping competitors/customers/suppliers buying shares
                                                              2. the PLC must provide regular, detailed financial info. This shows the competitors how well/bad the business is doing
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