Forms of Business (1.5.4) Flashcards
(22 cards)
What are the forms of business? (5 Forms)
-Sole Trader
-Partnership
-LTD
-PLC
-Franchise
What is a Sole Trader?
A Sole Trader is a type of business structure that is unincorporated where an individual is the sole operator of the business. They have full control over all business decisions.
Advantages of being a Sole Trader? (4 Advantages)
-Privacy
-Full Control
-All Profit
-Easy and inexpensive to set up
Disadvantages of being a Sole Trader? (4 Disadvantages)
-Unlimited Liability (responsible for debts)
-Limited access to finance
-Poor work-life balance
-Less professional image
What is a Partnership?
Unincorporated Legal arrangement that allows 2+ people share responsibility for a business. Partners share ownership, Profits, Work and potential losses.
Advantages of being in a Partnership? (6 Advantages)
-Ease of set-up/Low-starting Costs
-Better credit rating
-Different skills/experience/ideas
-Can have a better work-life balance as can take time off
-Shared responsibilities
and decision-making
-Increased access to finance
Disadvantages of being in a Partnership? (4 Disadvantages)
-Unlimited Liability
-Potential conflict/ disputes
-Have to share profit equally regardless of contribution
-Difficult to transfer ownership
What is a Private Limited Company (LTD)?
Incorporated business where Selected trusted Shareholders instead of random shareholders. Doesn’t publicly trade shares and has a max of 50 shareholders. Most LTD’s are small businesses.
Advantages of being a Private Limited Company? (4 Advantages)
-Limited liability (not personally responsible for debt)
-Access to greater finance
-Business name protection
-Easier to transfer ownership
Disadvantages of being a Private Limited Company? (4 Disadvantages)
-Lack of privacy
-More expensive and time-consuming to set up
-More complex legal requirements and regulations
-Annual financial reporting and auditing required
What is a Public Limited Company (PLC)?
Incorporated business that can sell its shares to the general public. Similar to a LTD but has more legal and financial requirements.
Advantages of being a Public Limited Company? (4 Advantages)
-Can raise more capital by selling shares to investors/Access to finance quickly
-Limited Liability
-Shared risks among larger group of shareholders
-Greater public profile as shares online increase visibility
Disadvantages of being a Public Limited Company? (5 Disadvantages)
-Original owners loose control
-High costs to set up and run
-Risk of Takeover
-More regulations +Taxes
-Less privacy as public can see financial info
What is a Franchise?
Type of business model where the owner of the business (franchisor) grants the right to use their business name, products and processes to another person (franchisee) in exchange for a fee.
Advantages of being a Franchise? (3 Advantages)
-Little to no industry experience necessary
-existing customer Base + Brand
-Lower risk starting an entirely new business
Disadvantages of being a Franchise? (5 Disadvantages)
-High initial investment
-Limited creativity
-Lack of privacy
-Decreased Profits
-Shared information
What is Unlimited Liability?
When the business owner and business have the same legal identity which means the business debt will have to be paid with personal assets.
What is Limited Liability?
When the business owner and business have a separate legal identity which means the business debt will be paid off by the business resources and not the personal assets of the owner.
What is a Not-for-Profit Business?
-A business where all Profit goes to social causes. Still aim to make a profit to go towards their chosen cause.
What are the two types of not-for-profit businesses?
Charities and Social Enterprises
What is a Charity?
An organization set up to provide help and raise money for those in need.
What is a Social Enterprise?
An organization whose main goal is promoting social or environmental welfare rather than making or maximizing profits. Profits usually reinvested back into the business or used to create positive social change or address and environmental issue.
