IntroductionThis assignment is all about the purpose of running a business, the main purpose of running a business it to make profit for the owners and to see whether the product is meeting the needs of the customer. In this assignment you will learn the main two points of running a business, which are to maximise profit and corporate social responsibility. You will learn the different types of ownerships with definitions and examples, also it will talk about different types of businesses based on size, scale and locality. It will then go on to inform you about the benefits of setting up a partnership from sole trader and also talks about the problems that could occur by doing so. Lastly it will tell you the benefits of setting up a private limited company and also the problems of doing so. Two purposes of most businessesThe main purpose of a business is to sell products to consumers. Businesses want to make profit and expand their business, this can only be done by selling products to their customers that actually interest them for example smartphones. Smartphones are a necessity in this day of age, mostly everyone has a smartphone as it is useful/handy, entertaining, informative etc. The other purpose of businesses is to sell services to the people, business services are supplying commodity to any member of the community. Services include house moving service, car wash, party planning, transport etc. Ownership description and exampleType of ownershipDefinitionExampleSole traderA person who is the owner of the business, keeps all profit but is liable to losses. BeauticiansPlumbersBuilders Partnership (both unlimited and limited)Limited: When two or more partners get together and conduct a business in which one or more of the partners is liable only to the extent of the amount of money that partner has invested.Unlimited: Both partners in the business have unlimited liability which means their personal belongings are a part of the partnership’s commitment. Limited Partnership: Professional Organizations Taxes & AssetsUnlimited/General Partnership:Medical Legal Real Estate Private limited companyA private limited company (LTD) is a small private business in which the owner’s liability is limited to their shares. This type of organisation limits owners to their shares, in this organisation shareholders are restricted from publicly trading shares. New Look Public limited companyA company registered under the Companies Act with minimum money requirements. This company’s securities are traded on a stock exchange and can be bought and sold by anyone, according to the law the organisation has to publish their complete financial position so investors can determine the true worth of the shares. British Petroleum (BP)Tim Hortons Starbucks Co-operativeFreedom to voluntarily meet economic, social and cultural needs. This is a firm controlled and operated by a group of users for their own good. Each member of the group has to contribute equity capital which is invested money that is not paid back to the investors in the normal course of a business. The firm follow the one member, one vote rule.John Lewis Partnership (employee owned business)The Co-Operative GroupFranchiseA relationship in which a franchisor provides a licensed privilege to the franchisee to do business.McDonald’sSubway KFCMathnasium UK- Teaching children maths in a way that makes sense to them. Government/state ownedFunded, belongs and controlled by the government. Transport for London National Exhibition Centre (NEC) Charity/voluntary/not-for-profit organisationsOrganization with the purpose to benefit society often without profit and government. WaterAidOXFAMBritish Red Cross Society Macmillan Cancer SupportClassifying businesses based on size, scale and localityBusiness description (including ownership type)Size (number of employees)Scale (local, regional, national, European and global)Sector (primary, secondary or tertiary)Partnership: Balfour Beatty is a British multinational group that specialises in construction and support services also infrastructure investments. Balfour Beatty is a large business consisting of 21,829 employees (2016). Balfour Beatty works around the world, it is a global business and serves people construction, support and infrastructure. Balfour Beatty was founded in the year 1909 and was founded by George Balfour and Andrew Beatty. Balfour Beatty is headquartered in London. Balfour Beatty is a secondary production business as they work all around building things using some of the following materials: stone, clay, sand and wood to create buildings/sites. Private Limited Company: SnagAJob is an online employment website specializing in the hourly marketplace. SnagAJob is a medium business with around 185 employees working for them. SnagAJob is a medium business which is national as it operates within the country, it is only for the needs of the public people who need jobs. SnagAJob was founded in the year 2000 and it was founded by Shawn Boyer. SnagAJob is headquartered in Virginia, United States. SnagAJob is a tertiary business as it’s the need of others, provides service to the public people. Sole Trader: New & Booze is a sweet shop that provides little essentials and fatty foods. News & Booze is a small business.New & Booze is a local shop in London. News & Booze sells products which makes it tertiary sector. They provide and sell service to the customers.Public Limited Company: British Petroleum (BP) is an oil and gas industrial company. BP is a large business. BP has 84,100 employees working for them, measured from 2011-2016. BP is a local institution located in Southall, Hounslow. It was founded in 14 April 1909, London and it was founded by William Knox D’Arcy.BP is a primary business and provides service for customers. Primary sector involves around obtaining raw materials such as metal, coal being mined, oil getting drilled etc.What benefits can a sole trader obtain (get) by setting up a partnership?Share pressureWorking alone as the owner can be a struggle, all the work pressure is on your head alone and you have to complete all the tasks yourself, this way it makes it stressful for the sole trader and can cause him to get ill due to the pressure. However working in a partnership makes it easier as the workload can be halved equally between the two and tasks can be done together. In businesses all partners are equally responsible for the business therefore, if one person wants to go on holiday or has any kind of an appointment during working hours at least they know there will be someone to look after the business however if you are a sole trader you would have to close your business if you could not find someone willing to look after your business. Bring in new ideasSole trader businesses run only on the owner’s decisions and opinions, so whatever decision he makes affects the whole business and that predicts whether the business will do well or not. But if the business was in partnership then it would be good for the business because there would be another person’s opinion put in as well which makes the decision more strong. Having a partner is good because your partner could have experience or could be a lot more knowledgeable than you in certain areas, so having a partner would really be useful and handy for the businesses future. Raise additional fundsBeing a sole trader and trying to raise additional funds is not easy, it takes a lot of effort and hard work however having partners in the business working alongside you would mean that there are more people to access loans from the bank as for a sole trader he would get less money to borrow as he is only one person. Having more money will enable the business to expand into new markets, as for sole trader businesses that cannot be done. Having a partner by your side to help you out will be a lot easier, they will be there to support you throughout the whole process.What problems may a sole trader face if they choose to set up a partnership?Share profitIf a sole trader was to set up a partnership business he should know that all the partners have a right over the profit the business makes as all of their hard work and effort has been put in for the business to make profit. Sharing the money with the partners is the one issue in setting up a partnership business. If one person in the partnership business has invested more money into the business for the success or they feel that they have worked harder than the others then they should be entitled to a larger amount of the profit. This could cause conflict between shareholders which impacts the business in a negative way. As for a sole trader there is no sharing the profit as the duties and work that had to be done was done alone, so all the profit is kept by one person. Loss of full controlBeing a sole trader’s benefit is that no one interferes with your decisions, however working in partnership means that your partner too has a say and consultation has to be made before making final decisions. It is a disadvantage because not always do both partners agree on the same point, there can be disagreements which makes it more difficult to decide. Having disagreements between the partners can affect the business on how it is running and whether it will do well or not, disagreements are normal and happens in many business but they should be sorted out between one another and from there a final decision should be made. As a sole trader theses problems will not come your way. What benefits can a sole trader obtain (get) by setting up a private limited company?Limited liability There are many benefits by setting up a private limited company from a sole trader business. Running your business as a limited company means you have the reassurance of limited liability, this is a benefit for the business as if there was a fraud taken place then you will not be in debt. So a limited company gives protection just in case anything goes wrong, whereas in a sole trader business the trader is responsible for anything that goes wrong, he has to pay for the businesses losses etc. Sell shares to raise fundsIf a sole trader was to set up a private limited company then he would be able to sell shares to raise funds for his business, this will give the company more money so they can expand their business. But if he decided to remain a sole trader and he tried to raise funds like that then he would have found it very difficult and due to this it would slow down the development of his business. Funding for a limited company is a lot easier than sole trader as in private limited companies they are able to sell shares which means there are more fund investors, however as a sole trader they only have the funds that they are able to gather alone. What problems may a sole trader face if they choose to set up a private limited company?Legal requirements to meet If a sole trader chose to set up private limited company then he will have to meet the legal requirements needed to set up a private limited business. The sole trader will have to choose a suitable name for his company and the name should either end in Limited or LTD, he should have an address physical in the UK as through this address official information regarding the company will be sent, he would have to appoint at least one director for the company as the directors are legally responsible for running the business and making sure that company accounts are completed properly, one shareholder is needed as limited companies are usually limited by shares, memorandum and articles of association- 1. Memorandum is a legal statement that’s signed by all shareholders agreeing to form the company. 2. Articles of association are written rules on running the company agreed by the shareholders, directors and company secretary, the company needs to be register online if you have everything to set up and lastly register for corporation tax after registering with Companies House, if corporation tax is registered late then you may get a penalty. Share profitIn a private limited company there will be many people working either for you or with you so that means that the workers/partner have full right over a share of the profit that comes into the business as they too had participated in helping to make the revenue. Some people may feel that they have worked harder and have put more effort into their work than others, so they will feel they deserve more money than everyone else as they have worked for it. However as a sole trader all the profit that is made by the business goes all to the owner after paying tax as he has worked hard for the money he has made and anyways he doesn’t have to share the money with anyone else as he works alone.ConclusionThe two main purposes of running a business are to sell products and services to consumers. The eight types of ownerships of a business are sole trader, partnership (limited & unlimited), private and public limited company, cooperative, franchise, government/state owned and voluntary/charity. Different businesses will be classified differently according to its size and scale, for example McDonald’s is a franchise and is a large business as it has 375,000 employees and a large business is a business with 1000+ people working for them. Advantages of a sole trader going into a partnership would be share pressure, bring in new ideas and raise additional funds on the other hand the disadvantages of setting up a partnership would be that the profit has to be shared and the trader will no longer have full control. Advantages of a sole trader setting up a private limited company would be that they have limited liability and they can sell their shares to raise funds but the disadvantages would be that there would be many different legal requirements that need to be met and also the profit will have to be shared. Being in a partnership is better than being in a sole trader business as there is more than one person’s thought in the decision so it makes the final decision stronger, there may be some disagreements throughout however it is more reliable to have a second opinion on anything. In a sole trader business the profit that is made goes all to the owner whereas in a partnership the money has to be shared. In partnership businesses the success or the failure of the business is all on the owner’s decisions so the credit goes to both or more owners, in a sole trader the business gets run by one person so the credit and profit goes to him alone after paying tax, he won’t have to share the money with anyone else.