1. Chapter 19
Business Organisations

2. Key Areas
• Which type of Business Organisation should be
set up…
– Sole Trader
Generally asked to
– Partnership distinguish between
– Ltd Company these
– Public Ltd company
– Business alliances (last chapter)
– Franchising
– Co-ops
• Why would you change between these?
• State involvement in business
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3. Structures differ in terms of:
• Formation & Dissolution
• Ownership
• Control Things to bare in mind
• Management for question on
Distinguish between
• Finance different forms of
• Profits ownership
• Risk
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4. Sole Trader
• Own & manage own business
• E.g. hairdresser, mechanic, plumber etc
Formation:- Easy-
Register business name with Companies Reg
office if different from your own name
May require licence e.g. pub
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6. Print
Sole Trader Advantages Disadvantages
Formation & Dissolution Easy to form Business dies with person
Easily changed
Ownership & control Single person
Full control
Management & Finance Quick decision making Long hours, few hols
Account privacy Hard to raise all finance
Little paperwork themselves
Hard to be an expert at
everything with no
partner
Profits & Risk Keep all profits take all risk (unlimited
liability)
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8. Partnership
• 2-20 people in business together with a view
to make a profit.
• Formation- simple- Register business name &
register with the Revenue Commissioners
• Deed of partnership (recommended)
– How much invested by each
– How profits are shared
– Salaries to be paid
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10. Print
Partnerships Advantages Disadvantages
Easy to form New partnership must be
Formation & drawn up when partner
Deed of partnership
Dissolution leaves/dies
Work shared among Disagreements
Management & partners- less stress Delayed decision-making
Finance Better decision making Harder to borrow than a
Extra finance & expertise co.
with new partners
Synergy-sum of talent of Shared profits
Profits & Risk partners exceeds their Unlimited Liablity
individual
contributions=greater
profits
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11. Note…
Changes in Business Ownership
Pos Q
structures by Businesses
Reasons for change form Sole Trader to Partnership
• New partners bring additional capital for expansion
• New partners bring new expertise and skills to the business
• Risks involved in the business are shared
• Workload of a Sole Trader can be shared in a partnership
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13. Limited Company
• Businesses are owned by investors called shareholders who
contribute money to a common fund called share capital
• This money is used to finance the business.
• Profits are shared among the shareholders in the form of
dividends
• Limited Liability-Shareholders only loose their investment if
business goes bankrupt
• LTD
• PLC- shares freely bought & sold on stock exchange
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14. How are companies run?
Shareholders
elect
Board of Directors
recruit
Managers
run
Finance Operation Personnel Marketing
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15. See Page 338
Private Limited Company
• 1-99
• Limited Liability
• “Ltd”
• Own legal entity because of the business birth
cert called…
• Publish accounts
• Voting…1 share = 1 vote…3 = 3 votes
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16. Forming a Private Ltd Company
3 Documents…F A1, M o A, A o A
Registrar of Companies office + legal fee
Certificate of incorporation
Statutory Meeting
2010 Q2 poorly
answered Ready to go!
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21. Print
LTD Company Advantages Disadvantages
Formation & Dissolution Co. Legally independent Setting up is complex &
of owners, continue to time consuming
exist after a death
Ownership & control Owned by shareholders-
easy & cheap to transfer
ownership by sell shares
Management & Finance Easy to raise finance by On-going paperwork
selling shares
Annual account audit
Give shares to staff to help
motivate them Annual report to CRO
available to public
Incorporated- Improves
buss. image & credit
worthiness
Profits & Risk Limited Liability Profits shared among
Profits shared shareholders
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22. Changes in Business Ownership
Note… Pos Q
structures by Businesses
Reasons for change from Sole Trader to Private Limited Company
• The Business can raise additional finance for expansion from up to 50
shareholders
• The business can gain additional expertise through new owners
• The owners get all the protection of Ltd Liability
• As a limited Company, the Business will find it easier to borrow from
banks
• The continuity of the Business is assured because if a shareholder
dies, the company carries on
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24. Co-ops 7 + members
• A Co-Op is formed when a group of people pool their
resources in capital, skills, and trade to improve their position
by working together for their mutual benefit
• Democratically owned & controlled by their members.
Members may be workers, suppliers or customers. Each
member has 1 vote irrespective of shares
• Limited Liability
• Producer Co-op-farmers or fishermen eg. Kerry Co-op who
market & sell their produce
• Worker Co-op- Workers pool their savings to start a business
together eg Taxi firm
• Credit Union D. Dempsey

25. Print
Co-op’s
Advantage Disadvantage
Formation & Equal voting More complex , time-consuming &
Dissolution regardless of no. of expensive than sole trader or
shares partnership.
Difficult to cash in shares without
member approval
Management & One member= one Annual audit & annual return to
Finance vote- CRO
Easier to qualify for Difficult to raise finance
grants & loans than
sole traders &
partnerships
Profits & Risk Limited Liability Profits shared among members
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27. Public Limited Company
• At least 7 shareholders & no max no.
• PLC shares can be freely bought & sold on
stock exchange
• Formation: starts off as a Private Ltd. Co. &
applies to the stock exchange for a listing
(quotation).
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29. Print
PLC’s Advantage Disadvantage
Ownership & Cheap & easy to transfer ownership Registering as a PLC complex &
Control from one person to another time-consuming and costly
Mgt & finance PLC have access to large amt of Must comply with Co.’s Acts.
finance by selling more shares. Detailed info made public-
Reward staff by giving them shares reduces confidentiality
in the co. PLC’s attract more public
Credit-worthiness improved attention
Stock market quotation gives Easy take-over targets as
prestige & status shares on stock exchange
Profits & Risk Limited Liability Many shareholders short term
speculators & expect high
dividends- a lot of pressure on
directors
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30. Note… Pos Q
Changes in Business Ownership
structures by Businesses
Reasons for changing from a Co-op to a PLC
In recent years the biggest agri co-ops in Ireland have become PLCs
(Kerry Coop, Waterford Coop, and Avonmore Coop) Waterford +
Avonmore merged to form Glanbia PLC. Some reasons for this are as
follows:
• Coop model restricts the ability to raise capital, whereas the PLC
has access to large amounts
• Becoming PLC allows a business to raise equity. General public
outside farming.
• PLC status makes easier expansion into international markets
• PLC status allows economies of scale and allow compete with large
internationals on price
• Formation of the PLC allows farmers the opp’ to realise their
investment by selling their shares on stock exchange
• Takeovers of other firms can be paid for through the issue of shares
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31. Franchising
Is an agreement whereby a person is granted
permission to produce a product or service to a
proscribed formula in return for a fee. The
franchisee may set up the business as a sole Trader,
partnership or Ltd company. The Franchiser receives
an initial fee and a % of profits or turnover from
each franchise
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32. Benefits to Franchisee Disadvantages to franchisee
• Ready made business • Initial Payment
• Established business more • + Royalty
likely to succeed than new • Loss of control, franchisor
• Economies of scale in imposes restrictions to protect
advertising, production, their name, product etc.
purchasing etc • Unable to sell business
• Guarantee of no competition without franchiser permission
in specified area • Each franchisee must achieve
• Standardised same standards as other
product…customers know outlets
what they are getting • Some outlets achieve bad rep
• Ongoing training, Advice, for all outlets
assistance with marketing,
mgmt etc
• Cost of buying franchise may
be lower than setting up bus
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35. Semi-State Bodies
Ref : page 344
Semi-State bodies are often criticised for the following reasons:
• Often accused of being inefficient
• Usually heavily unionised and therefore employees are inflexible and
resistant to change
• Many are run at a loss and are therefore subsidised by the taxpayer
• Many are poorly capitalised as there is only one shareholder: the state.
Much of their capital is borrowed which leaves them highly geared
• The may be very bureaucratic and therefore overly concerned with red
tape and procedures
• Some people feel that decisions taken by some semi-state bodies are
often for political reasons, rather than in the best interest of the
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