Business
Introduction to Business
Types of businesses
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Types of businesses
Types of Businesses
Sole Trader
- Encompasses individuals who are self-employed and own their business alone.
- Sole traders have unlimited liability, which means the owner is personally liable for any business debts.
- The business and the owner are legally the same entity.
Partnership
- A business owned by two or more individuals who share the profits and losses.
- Partners have joint and several liability, meaning they are individually responsible for the total partnership's debts.
- A formal agreement, called a partnership agreement, often outlines how profits, losses, and work are shared.
Limited Company (Ltd)
- A distinct entity that is legally separate from its owners (the shareholders).
- Shareholders have limited liability, hence their personal property is protected if the company fails.
- There are two types: private limited company (Ltd), whose shares cannot be offered to the public, and public limited company (plc), whose shares can be sold to the public.
Franchise
- A business model where a well-established company (franchisor) allows an individual (franchisee) to trade under its name.
- The franchisee buys the franchise rights using a franchise fee, effectively purchasing a ready-made business.
- The franchisor provides training, equipment, and often a customer base.
Co-operative
- A business owned and run by the people who either work in it, or, the people who use its services, known as members.
- Profits are reinvested in the business or distributed among the members based on their participation or investment.
- They follow a democratic structure where each member gets one vote.
Legal Structures
Sole Proprietorship
- The simplest and most common form of business, owned by one individual.
- The owner is personally liable for all business debts and responsibilities.
Partnership
- Formed when two or more individuals come together to form a business.
- Like sole proprietorships, partners are personally liable for business debts.
Corporation
- A legal entity that separates the owners' personal assets from business debts.
- Owned by shareholders who are not personally liable for the company's debts.
Note: BTEC Business Level 1 terminology might differ from these general business terms, refer to your course materials for precise definitions.