Business: Structures

Business: Structures

Business Structures

Sole Trader

  • A sole trader is owned and run by one individual.
  • This individual has unlimited liability, meaning if the business falls into debt, they are personally liable.
  • They benefit from keeping all profits but also face all losses.

Partnerships

  • A business formed by two or more people is known as a partnership.
  • Each partner has equal say in the business and is liable for its debts.
  • Profits and losses are shared equally amongst the partners.

Private Limited Companies (Ltd)

  • A Ltd is owned by a group of shareholders and is run by directors.
  • The liability of the shareholders is limited to their investment in the company.
  • Shares can only be sold privately, generally to friends, family or other businesses.

Public Limited Companies (Plc)

  • A Plc is owned by shareholders who buy and sell their shares on the stock exchange.
  • It requires a much larger level of capital to set up compared to other business types.
  • Shareholders benefit from limited liability.

Franchises

  • A franchise allows a business (franchisee) to operate using the name and brand of an established company (franchisor).
  • Franchisees must pay a sum to the franchisor, typically a percentage of their profits.
  • The franchisee benefits from the franchisor’s existing reputation and business model.

Co-operatives

  • A co-operative is run by its members for the benefit of its members.
  • Each member has an equal say in decision making.
  • Any profits are usually divided amongst the members.

Joint Ventures

  • A joint venture is a strategic alliance where two or more businesses form a partnership for mutual benefit.
  • The businesses share in the profits, losses and decision making.

Multinationals

  • A multinational operates in multiple countries, often having a headquarters in one country.
  • They often take advantage of different markets, cheap labour and tax benefits.

Remember that the ideal business structure for an organisation depends on a variety of factors including its size, the nature of its operations, its financial strength and the industry in which it operates.