Business planning - Types of business
Theory 1 - Different business structures - advantages and disadvantages
The main advantages and disadvantages of each business structure are given below.
Sole trader
- Advantages
- Cheap and easy to start
- All the profit is yours
- You are your own boss
- You do all the work
- Disadvantages
- You have NO limited liability
- All the risk is yours
- What about sickness and holidays?
- Do you have all the skills?
Private limited company
- Advantages
- You have limited liability
- Easier to raise larger sums of capital
- More flexible than PLCs
- Opportunities for bringing in more skills
- Disadvantages
- You can only sell shares privately
- Not very flexible if expansion becomes possible
- More legal formalities than sole traders
Public limited company
- Advantages
- You have limited liability
- Easier access to finance
- More funds available for investment
- Public awareness gives status
- Disadvantages
- You have to publish results
- Others, e.g. auditors have to look at your books
- Greater need to conform to legal procedures
- Owners might lose control
There is a business planning case study that you may like to have a go at when you have looked through this section.
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