1.4 Types of business organisation Flashcards
(25 cards)
Sole trader
A business owned and operated by one person who keeps all the profits but has unlimited liability.
Unlimited liability
The owner is personally responsible for all the debts of the business. Personal assets can be taken.
Partnership
A business owned by 2 to 20 people who share profits and have joint unlimited liability.
Deed of partnership
A legal agreement between partners stating responsibilities, profit share, and decision-making rights.
Private limited company (Ltd)
A company owned by shareholders who have limited liability. Shares can only be sold privately, not on the stock market.
Limited liability
Shareholders are only liable for the debts of the company up to the value of their investment.
Public limited company (PLC)
A company whose shares are traded publicly on the stock exchange.
Shareholder
A person or institution that owns shares in a company.
Dividends
Part of the company’s profit paid to shareholders.
Annual General Meeting (AGM)
A yearly meeting where shareholders vote and review company performance.
Franchise
A business that uses the name, logo, and products of an existing successful business.
Franchisor
The original business that grants the licence to a franchisee.
Franchisee
The person or business that buys the rights to operate a franchise
Joint venture
Two or more businesses agree to work together on a project and share costs and profits.
Public corporation
A business owned and operated by the government, often to provide essential services.
What is unlimited liability?
It means the owner is personally responsible for the business’s debts and may lose personal assets.
What are two advantages of being a sole trader?
Keeps all profit; makes all decisions quickly.
What is the difference between an Ltd and a PLC?
An Ltd sells shares privately, while a PLC sells shares to the public on the stock exchange.
Give one benefit of a franchise to the franchisee.
Lower risk due to brand recognition and training provided by franchisor.
Why might two companies form a joint venture?
To share costs, risk, and resources while accessing new markets
What are two disadvantages of partnerships?
Unlimited liability and potential for conflict between partners.
What is the main reason for a public corporation to exist?
To provide services that are too essential or unprofitable for private firms
What is one disadvantage of being a public limited company?
Risk of takeover and high cost of meeting regulatory requirements.
unincorporated business
is one that does not have a separate legal
identity. Sole traders and partnerships are
unincorporated businesses.
