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					                                         CHAPTER 19
                                OWNERSHIP STRUCTURES
The syllabus states that students should be able to choose between alternatives and know about
changing trends in ownership and structure.

Choosing between alternatives.
This would involve comparing advantages and disadvantages. The following headings could be
1. Formation.
2. Dissolution.
3. Management decisions.
4. Finance
5. Profit
6. Risk                          .

The alternatives.
1. Sole Trader. (small businesses, farmers, tradesmen and some professionals)
Definition: A person who owns and manages his or her own business.

 Very common
 Often family involvement
 Own name V must register business name (Registrar of Business Names)
 With the exception of tax, their financial affairs are confidential.
 May need a licence.

2. Partnership. (accountants, solicitors, architects, some music bands)
Definition: When at least 2 and not more than 20 people form a business with a view to making
a profit.
Other characteristics.
 Deed of Partnership.
 Financial affairs confidential (except tax).

3. Private LimitedCompanies.
Definition: Businesses, owned by up to 50 shareholders with limited liability, which contribute
to a common fund.
Other Features.
 Incorporated gives Limited Liability.
 Equity Capital
 At least 1 shareholder and 2 directors.
 Managing Director or Chief Executive.
 Dividends
 Board of Directors
 Ultra Vires
 Continuity of Existence
Stages in Setting up a Private Limited Company.
    1. Prepare necessary documents
Memorandum of Association. This document governs the company’s dealings with the public.
It contains :
Name and address of company; aims; number of shares held by each; details of authorised

Articles of Association. Governs dealings within the company. It contains: Capital Structure;
Types of shares; conduct of meetings; voting rights; procedure for elections; duties of directors.

Form A1. This contains registered address of the Company; a statement of issued and authorised
capital; a list of directors; a statement of compliance with the Companies Act.

   2. Documentation and the relevant fee is submitted to the Companies Registration
   3. A Certificate of Incorporation is issued
   4. A Statutory Meeting is held. Share Certs are issued; Directors appointed; Auditors
      appointed. Authority given to open a bank account in the Company’s name.
   5. Commence trading.

4. Public Limited Company.
Definition: Businesses owned by shareholders, which contribute to a common fund and are
quoted on the Stock Exchange.
Other characteristics. Same as Private Limited Company with the following exceptions.
 Stock Exchange. Must satisfy Committee of Dublin SE (protects investors).
 Must publish accounts.
 Minimum of 7 shareholders. No maximum.
 Trading Certificate.
 Future Rights issue a possibility.

5. Co-operatives.
Definition: Businesses owned and controlled by their members who may be the workers,
suppliers or customers.
 Producer (North County Dublin Growers).
 Worker
 Consumer
 Saver (Credit Unions)

Other characteristics.
 1 member 1 vote.
 Annual financial returns sent to Registrar of Friendly Societies.
 Minimum of 7 members.
   Many Producer Co-ops have become Plc. Say why.

6. Franchises.
Definition: A business, which sells a product under licence.
Other characteristics.
 Franchiser to Franchisee.
 Franchise agreement (name, logo, methods of operation, product and marketing strategy).
 Flat fee V %.
 Site recommendation, building specifications, décor.
 Management and accounting support.
 Standardised product.
 Reduced risk for investor.
 National advertising.
 Bulk buying.
 Instant brand recognition.

Why do businesses change their ownership structure?
 New skills.
 More capital.
 Reduce risk (limited liability).
 Attract better management.
 Enhance reputation.

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