Governance & Funding Flashcards
Sole traders
Governance
•make all decisions about business themselves
•not accountable to anyone
Benefit: Quicker to make decisions
Negative: does not benefit from diverse viewpoints
Funding
•personal sources
•profits from business reinvest
• loans from family or friends (bank loan needs formal business plan)
Partnerships
Governance
- partnership agreement in place for each individual partners rights and responsibilities
• how profits shared
• what is done in the event of death or retirement or admission of new partner - how business will operate day to day basis (e.g for context)
Benefit:
- More viewpoints
Negative:
- more clashes
- not a legal requirement however if no partnership agreement in place, partnership act (1890) in place and partners won’t always agree with its provisions
**Funding **
•More likely to get funding from bank as viewed as less risk as sole trader
- the more partners, the more risk is shared
•partnership isn’t separate legal entity from owners
Limited liability partnerships (LLP)
Governance
- must have partnership agreement in place (how organisation will be administered)
- must be registered at companies house
Funding
- registered at companies house so LLP can enter contracts or own property.
- raising finance from banks easier easier as LLP is separate legal entity responsible for assets and liabilities
Limited partnerships (LTD)
Governance
partnership agreement
- agreement should be in place how decisions made
- agreement in should be in place profits/loss shared.
- this agreement should be registered at companies house.
funding
Scotland: LP has separate legal personality from partners.
- easier to own property
- easier to enter contracts
Benefit: easier to raise finance as separate legal entity responsible for assets and liabilities
England and wales: Limited partnership is not a separate legal entity, and does not have the same ability to raise finance as not a separate entity responsible for assets and liabilities.
finance is raised same way traditional partnership
Private limited companies (LTD)
Governance
The company will operate according to its articles of association
-must have at least 1 director
-common for owner to be shareholder and director
Funding
- shares traded privately, usually between family and friends.
- easier to raise funds through banks then sole traders
- large companies who’s statements are audited, easy to get funding
Public limited companies (PLC)
Governance
Like LTD, PLC operates in accordance with articles of association
- Shareholders own PLC
- directors control PLC.
- independent non-executive directors, executive directors Requirement of corporate governance code most PLC (listed on stock exchange)
FUNDING
*freely bought and sold on stock exchange. Route to raising finance
Not for profit organisation (NPO)
Governance
Determined by
– unincorporated or incorporated.
- board of trustees to help with oversight
Funding
Profit usually reinvested into the organisation & used as a source of capital
Public sector
Governance
- accountable to the government
Funding
- funded by the taxpayer
- government sets budget which must be operated within