FORMS OF OWNERSHIP
There are different types of ownership structures for businesses in Ireland.
1. A sole trader
is a person who owns and runs his/her own business. There are no specific laws concerning sole traders as they have the freedom to run their business as they please.
Advantages of being a sole trader:
• Easy to start up.
• They get to keep all the profits.
• They build up personal contact with customers.
• They decide all their own time off/on.
Disadvantages of being a sole trader:
• Unlimited liability, which means that if the business goes bankrupt the sole trader’s personal wealth (car, house) can be used to pay off the debts.
• They suffer all the losses.
2. A partnership
is a business relationship owned by two to 20 people with the intention to earn and share profits. A partnership agreement is drawn up setting out the rights and duties of each partner.
Advantages of a partnership:
• There is a possibility of more capital (money) being available to the business than with a sole trader business.
• There is also the advantage of using other partners’ skills and business strengths to the benefit of the business.
• The presence of another partner(s) can be reassuring when making business decisions.
Disadvantages of a partnership:
• Partners will still be subject to unlimited liability.
• They will also have to consult partners (as far as the agreement states) for crucial business decisions. The partners will have to share control and share profits of the business.
3. A private limited company (Ltd)
has between one and 149 shareholders who have limited liability for the company’s debts. Shares cannot be offered to the general public or be traded on the stock exchange. Private limited companies must be registered with the Companies Registration Office. A private limited company will elect a board of directors to run the company for them.
Advantages of a private limited company:
• Shareholders have limited liability, which means they can only loose what they invest in the company; their private wealth cannot be touched.
• Capital is easier to raise with up to 149 shareholders as the company can just sell more shares.
Disadvantages of a private limited company:
• It is more costly to set up than a sole tradership.
• There are a lot of legal requirements to be followed.
• Shares cannot be sold on the stock exchange.
4. A public limited company (PLC)
is a company with sevenplus shareholders with no limit. Shares can be offered for sale to the general public and are more heavily governed by regulations.
Advantages of a public limited company:
• A PLC can raise capital by offering more shares to the general public. It also has the added advantage of being better recognised.
• It has limited liability.
Disadvantages of a public limited company:
• Because of the unlimited number of shareholders, profits are divided among a large number of shareholders.
5. A co-operative society
is a business which is owned and managed by and for the benefit of customers or workers with a common bond or interest. It is registered with the Registry of Friendly Societies. It is distinguished by the fact that each member has only one vote at company meetings regardless of the number of shares held. Examples include Kerrygold and the Credit Union.
Advantages of co-operatives:
• Members have limited liability.
• What may not be impossible for one person on their own, can be achieved through the co-operation of many.
• Each member has equal say no matter how many shares they hold; only one vote per member.
Disadvantages of co-operatives:
• There is no incentive to buy many shares as you have equal control with only one vote.
• Many co-operatives lack finance and expertise.
• Many are too small to compete successfully.
6. State ownership
A State agency is a company set up by the Government to perform specific functions. They are also known as semi-State bodies, State-owned enterprises or State-sponsored bodies. Some are commercial, selling goods or services to the public. They have the intention of making a profit. Examples: ESB, Bord na Mona, Aer Rianta, VHI, RTE.
Others are non-commercial: They perform functions without charging for the work that they do. Examples: Environmental Protection Agency (EPA), Workplace Relations Commission and National Consumer Agency.