2.1 Business Organisation Flashcards
(15 cards)
What are the types of business organisation?
Sole trader, partnership, limited company (private and public limited company)
These types differentiate based on ownership and control.
Define a sole trader.
A business owned and controlled by one person who may employ others.
List advantages of being a sole trader.
- The owner keeps all the profits
- The owner is their own boss
- Quicker and easier to set up
- Financial statements remain private
List disadvantages of being a sole trader.
- Only one source of capital
- Long working hours and heavy workload
- Financial loss when sick or on holiday
- Unlimited liability
What is a partnership?
A business that is jointly owned and controlled by more than one person.
List advantages of a partnership.
- More than one source of capital
- Shared workload
- Specialization among partners
- Quicker and cheaper to set up
- Financial statements remain private
List disadvantages of a partnership.
- Profits must be shared
- Potential for disagreements
- Unlimited liability for partners
What is a deed of partnership?
A document that outlines profit sharing, responsibilities, and exit strategies for partners.
Define a limited company.
A separate legal entity owned by shareholders and controlled by directors.
What are the key characteristics of a limited company?
- Owned by shareholders
- Minimum of two shareholders required
- Controlled by directors
- Must complete Memorandum and Articles of Association
List advantages of a limited company.
- More capital can be raised
- Shareholders have limited liability
List disadvantages of a limited company.
- Longer and more expensive to set up
- More paperwork and annual costs
- Profits shared with shareholders
- Original owners may lose control
- Financial statements are public
What is the difference between private and public limited companies?
- Private limited companies (‘Ltd’) cannot sell shares on the stock market
- Public limited companies (‘plc’) can sell shares on the stock market
List advantages of becoming a public limited company (plc).
- Large amounts of capital raised through the stock market
- Capital can be used for business expansion
- Higher profits from expansion
- Financial statements are freely available
List disadvantages of becoming a public limited company (plc).
- Profits shared with many shareholders
- Original owners likely lose control
- Higher annual costs and more paperwork
