Ownership Types
Storyboard Text
- Johnny is a sole trader and has the ability to make all decisions. However he has unlimited liability meaning its high risk. .
- Sure.
- Join my business?
- Partnerships have limited liability meaning that if their business goes into debt, only the business items are at risk.
- All partners share decision making and profits.
- Johnny left school at 16. He begins to clean windows to earn money. He works alone. He is now a sole trader.Sole traders have the ability to make all the decisions and keep all the profits. However they must register the business with HMRC.Unlimited liability means that personal items as well as business items are at risk.
- I would like to use your name and in return I will give you some of the profits.
- After a few months, Johnny starts to get quite a few orders which are more than he can handle. So, he asks his friend Paul to join him in the business.
- If we become a franchise, we will become a bigger brand and earn more money from royalties.
- Yes, but we can make all the decisions and he (our franchisee) has to follow as we say so we are still in control of our business.
- But we won't be able to split all the profits between us anymore. Some of it will go to him instead.
- This now means that Paul and Johnny are in a partnership now because the business is now owned by two or more people.Each partner must register with HMRC and often have to sign a contract (Deed of Partnership).
- We accept!
- Awesome!
- Paul and Johnny continue to further their window washing business and word of their success soon spreads quickly and they are approached by a business man. He would like to use their brand name in return for a share of the profit. This would mean that their business would now become a franchise.
- Paul and Johnny decide to think through all their options since it would mean changing their business from s partnership to a franchise. The liability won't change for either of the boys, it will still be limited. If the business man becomes a franchisee under their franchise, from any profits that are made, the boys take a percentage of royalties (30% for example). This means they will be making more of a profit than if nthey kept it as just a partnership due to having multiple branches.
- In the end, the boys see this opportunity as a good way to further build their business/bran into a much more successful and well known one. In addition its a good way to earn more profits for themselves and the business. In the future, this presents them with the ability to easily expand and have more franchisees to widen their service and business further.
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