Business ownership Part 2
Private ownership review Most private businesses are owned by sole traders, partners or are companies. Other alternatives are: • Cooperatives – societies which operate for the benefit of their members (whether customers or workers). • Franchises – where a large company allows a small operator to trade on name in return for share of profits.
Each owner has equal share/one vote Profits are shared equally Can have limited liability status Workers can decide whether to be owners Obtaining finance may be difficult Decisions by consensus take time ‘Hard’ decisions may be difficult to make ‘Equality’ can be hard for good leaders/workers Cooperatives Benefits Drawbacks
Less risky than starting own business Selling a known name Advice and guidance available Owner keeps most of profit Share of profit goes to franchisor Franchisee must abide by legal agreement Only franchisor products can be sold Success very dependent on popularity of product Franchise Drawbacks Benefits
Public ownership • Term used for enterprises owned and controlled by the state. • Aim is to provide services needed by everyone, regardless of income or wealth, eg health and education. • Mainly financed through taxation.
Examples of public ownership • Central government departments, eg Department of Health • Local authorities and councils • Public corporations, eg BBC, Bank of England, British Nuclear Fuels
Owner liabilities 1 All owners must: • Produce annual accounts • Pay tax on profits • Operate the business within the law • Abide by specific agreements (eg Partnership or Franchise agreement) or trade/professional regulations relating to their activity
Owner liabilities 2 • Sole traders/partners are personally liable for debts • Shareholders in companies can lose investment if business fails • Company directors can be held personally liable in law in certain circumstances • Franchise operators may have to meet specific sales targets.
Factors which influence changes of ownership • More capital required to finance expansion or extend operations • More skills/abilities required • Greater security/less risk required • Change of business activity • Changes in legal regulations and requirements