Business structure Flashcards
What are the 2 type of businesses in the private sector (legally)
Incorporated vs Unincorporated Business
What are the 4 classes of Businesses in the Private sector + what legal structures do they follow
Private limited company (Ltd) = incorporated
Public limited company (Plc) = incorporated
Sole trader = unincorporated
Partnership = unincorporated
What’s the difference between an incorporated and unincorporated company
Incorporated companies have limited liability and are separate legal bodies
Unincorporated companies have unlimited liability and are legally the same as their owners
What is a sole trader business
Owned, financed and controlled by one person
Unincorporated
Unlimited liability
Few legal formalities needed to set up
Pros and Cons of sole trader businesses
Pros:
- Easy and cheap set up
- Owner makes all decisions
- Owner keeps all the profits
Cons:
- Unlimited liability
- Limited capital
- Difficult to take time off
- Stress on owner
What is a partnership business
Owned by 2–20 people
Uses deed of partnership
Unincorporated
Few legal formalities
Accounts not publicly published
Ends when one partner leaves
Pros and Cons of Partnership Business
Pros:
- Specialisation
- Raise more capital
- Less pressure
- Privacy of financial details
Cons:
- Unlimited liability
- Conflict
- Ends if partner leaves
- Shared control
What should a company take into account when choosing a legal structure
- Finance needed
- Size of business
- Type of investment
- Risk level
- Desired control
What is a private limited company (Ltd)
Shareholders are friends/family
Incorporated
Controlled by board of directors
Run by MD
Pros and Cons of being a Private Limited Company
Pros:
- Limited liability
- Trusted ownership
- Raise capital via shares
- Limited financial disclosure
Cons:
- Limited capital
- Financial info public
- Legal requirements
- Loss of control possible
What is a Public Limited Company (Plc)
Shareholders can be anyone
Incorporated + limited liability
Controlled by Board of Directors
No max number of shareholders
Pros and Cons of Public Limited Company (Plc)
Pros:
- Limited liability
- Easier to raise finance
Cons:
- Loss of control
- Shareholder short-termism
- Must publish finances
- Hostile takeover risk
What are the 3 types of businesses in the social sector
- Charities
- Social Enterprises
- Co-operatives
What is a Social Enterprise
Main focus is social rather than profit
Revenue reinvested into community
Includes most charities
What is a co-operative business and the 2 types
A business owned by customers or employees
Types:
- Consumer or retail co-op
- Producer or worker co-op
Pros and Cons of Co-operatives
Pros:
- Limited liability
- Based on customer needs
- Community involvement
Cons:
- No stock exchange access
- Hard to raise finance
- May lack business skills
What are not for profit orgs
- Not for financial gain
- Social, environmental or cultural purposes
- Includes charities, social enterprises, pressure groups
