Managing a business

The sole trader

•  Business organization owned and controlled by one person

Advantages:

1.  Easy to set up
2. Personal business
• Closer contact with customer and workers
3. Full control over the business
• Decisions can be taken more efficiently
4. Receive all the profits

Disadvantages: 

1. Unlimited liability
•  All possessions could be lost to pay off any business debts
2. Full responsibility for managing the business
•  The owner of the business must do all kinds of activities in order to carry out his/ her business successfully: accounts, plan, marketing, PR and advertising
3. Lack of capital  
• Expanding the business is not usually possible
• If the business does not go that well the owner may have to spend all the money he/ she gains on debts

Partnerships 
Partnerships are businesses willing to expand, where two or more people, finance and run a business jointly. Therefore, profits also have to be shared.

• General partner
• Unlimited liability
• Limited partners
• Limited liability
• If all partners have a limited liability then it is similar to limited company but all partners can manage the business directly, unlike the shareholders of a normal limited company.
• Sleeping partner
• Provide money to the partnership in return for a share of the profits
• Will NOT manage the business

Advantages:

1.  Easy to set up
• Few legal requirements
2. Partners bring new skills and ideas
• Participate and help run the day-to-day business
3. New capital to allow the business to expand
• Partners have to buy their way into the management of the business, in order to do that they invest capital into the business

Disadvantages:

1. Partners can disagree
•  The business may suffer the consequences of financial disputes
2. General partners have joint unlimited liability
3. Partnerships lack capital
• Laws place a limit on the max. amount of partners, therefore the room for expansion can be very limited.

 Limited companies (LC)/ Joint-stock companies

• Sell shares to raise capital
• It is jointly owned by all shareholders, including its founder/s which own more than a 50% of all shares, controlling interest
• Shareholders, of most companies, also receive dividends once a year from part of the company's profits
•  Very large LCs with many shareholders hold annual general meetings (AGM)
•  Shareholders elect a board of directors

 Legal status

•  Private limited company
• Shares are sold only to family and friends

Advantages:

1. Raise additional capital
• + Permanent capital
2. Company shareholders have limited liability
3. Shareholders have no management responsibilities
4.  The company is a separate legal identity
• *Explained in the "starting a business" section 

Disadvantages:

1. Disclose financial information
• Share financial performance to the public in annual accounts
• Useful for shareholders
• Requires time and money
• Competing companies can obtain details about their situation in the market
2. Private limited companies cannot sell their shares publicly

• Public limited company
• At least two shareholders
• Can sell shares to any individual or organization on the stock market through a stock exchange or bourse
• 'Going public'- Obtaining a public listing to sell shares on the stock market

Advantages:

1. Can sell shares publicly
• Raise far more money to finance their business operations than other types of businesses
2.  Advertise their shares
• Through a prospectus containing general and financial information about the company that may attract would-be shareholders 

Disadvantages:

1. Can be expensive
• Many legal documents and company investigations are needed
• Advertising and developing a prospectus can also be expensive
2. Publish detailed annual reports and accounts
• Revenues and profits, fixed and working capital, loans and other liabilities, shareholdings, dividend payments and directors' salaries
3. Must hold AGMs
4. Management diseconomies
• Large firms may become difficult to manage
• Communication problems between various layers of the business
• Slow decision making
• Worker supervision
5. Vulnerable to takeovers
•  An external person or organization may buy enough shares to take control of the business
6. There can be a divorce of ownership from control
• Banks and other creditors may withdraw finance 
• The board of directors controls all company decisions
• Large shareholders constantly out vote shareholders with minority interests

Corporation

• Separate legal body from its owners
•  Multinationals
• Firm operating in more than one country
• Headquarter is usually found at the country of origin 

Cooperatives

• Owned by a group of people to undertake a certain economic activity, like growing and selling potatoes,  to their mutual benefit, to help each other financially and in terms of skills and time needed to sell their products
• Worker cooperatives
• Consumer cooperatives
• Profit- Bonuses or dividends for members or cheaper prices at retail cooperatives, delivering products to the market
• Non-profit

Public sector organizations

•  Controlled by the government
• In the benefit of society
• They do not aim to make a profit
• Mostly funded by taxes paid by individuals and private sector firms
• Central government authorities
• Completely managed and elected by the central government
• Local government authorities
• Given responsibilities by the central government 
• Government agencies
• Non-elected organizations
• Oversight and administration of specific government functions 
• Public corporations
• Business-like organizations that are carrying out certain public sector functions but privately
• They simply operate under the government's control