1.5.4 Forms of businesses Flashcards
(26 cards)
What is an incorporated business?
A legal entity that is separate from its owners meaning owners have limited liability (Bus has own legal rights seperate from owners)
-most operate as private limited company
What is an unincorporated business?
Isnt a separate legal entity, meaning owners have unlimited liability
-most operate as sole traders
What is a legal entity?
any company or organization that has legal rights and responsibilities, including tax
What is a sole trader?
Where an individual is owning a business on their own
-They can employ people but dont share the ownership
What’s sort of liability do sole traders have?
Unlimited liability
Meaning they own all the assets and are personally responsible for all debts
Give 2 strengths of operating as a sole trader
-Simple to run as the owner has complete control over decisions
-Easy to set up (can trans to limited company later)
Give 2 limitations of operating as a sole trader
Unlimited liability
The business is the owner, if the owners ill or loses interest the business will suffer
What is a partnership?
The business is started and owned by more than 1 person
What does the legal partnership agreement set out?
How partnership runs:
-how profits shared
-how decisions made
What sort of liability do partnerships have?
Unlimited liability, meaning the partners own all the assets and are personally responsible for debts
Give 2 strengths to operating as a partnership
-expertise and shared workload leads to increased efficiency
-greater potential to raise finance as both partners can provide
Give 2 limitations to operating as a partnership
-Unlimited liability Meaning
-potential for conflict, delaying vital decisions
How is limited liability important?
It protects shareholders in a company as they can only lose their investment
What is a limited company?
A company that has seperate legal entity to its founder.
-its owned by shareholders (who dont own assets and have limited liability) and run by directors
Give 2 strengths of being a limited company
limited liability
Shares in a limited company can be easily transferred, allowing for flexibility in ownership and potential for future business growth
Give a limitation of being a limited company
Less Control: Shareholders may have a say in business decisions, which can dilute the control of the original owner
More complicated structure for operations
What is a private limited company?
A limited company where the shares of the company aren’t traded publicly on a stock exchange
Give a strength and a limitation to operating as a private limited company
S- tax benefits, lower tax rates on profit compared to sole traders
L- Harder to raise capital as shares can’t be sold to the public
What is a public limited company?
A limited company where shares may be traded on the public stock market, more shareholders
Give a strength and a limitations to operating as a public limited company
S- limited liability
L- loss of control if shareholders purchase more than 50%
What are public sector organisations?
government owned entitles focused on providing essential services to the public
-funded by gov through tax
What is a social enterprise?
business with the primary goal of addressing social or environmental problems
What’s a not for profit organisation?
Businesses that trade in order to benefit the community
What is franchising?
Business arrangement where franchisor grants a franchisee rights to use their brand
