Business Structure - Sole Traders and Local Companies
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Transcript of Business Structure - Sole Traders and Local Companies
Understanding Business Structures
www.business.govt.nz
Types of Business Structure
• Sole Trader• Partnership• Limited Companies• Co-operatives• Franchises
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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
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Drawbacks include:-Unlimited liability-Lack of economies of scale-The business relies on the owner 100%
Sole Trader Drawbacks
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Partnership Benefits
Benefits include:-Shared responsibility-Allowing partners to specialise -Partners bring in more capital investment-Decisions, costs are shared
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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
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Limited Companies
There are two types:
1. Private Limited Company (Ltd)
2. Public Limited Company (Plc)
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Private Limited Companies Benefits
Benefits include:-Company can raise more capital by selling more shares-Shareholders can keep control of the business
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Private Limited Companies Drawbacks
Drawbacks include:-Accounts must be audited-Limited companies are more difficult to set up-Shares cannot be sold publicly on the stock market
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Public Limited Companies Benefits
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
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Public Limited Companies Drawbacks
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
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Co-operatives
There are two types:
1. Worker Co-operatives
2. Consumer Co-operatives
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Worker Co-operatives…
…Are owned by the whole workforce
…Everyone has a say in the business
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Consumer Co-operatives…
…Are local Co-op shops owned by the customers
…The profit is paid out or used to keep prices down
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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
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Franchises (Cont’d)
• 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
Find Out More
Facebook.com/business.govt.nzTwitter.com/business_govtNZLinkedin.com/company/business-govt-nzSlideshare.net/MED-Business business.govt.nz