Forms of Business Organizations Flashcards
(37 cards)
What is an organization?
A system that groups people together towards establishing a common goal
List 5 reasons someone may decide to start a business
- Will get to be their own boss
- Can pursue their interests
- For the ability to set their own schedule and goals
- For the chance to express themselves the way they want
- Opportunity to do different tasks - manager, customer service, etc
- To have a second career
- To be able to work from home
What is the Private Sector?
The part of the economy that is funded by private individuals and owned by private firms.
The Private Sector includes…
the manufacturing industries, firms in the construction industry, joint ventures, multinational firms, hawkers and cooperatives
Give a definition for the term ‘Public Sector’
The part of the economy that is funded by the government through taxpayers.
What is a Sole Trader?
A single business owner who may employ others to work for them but they have to make all the decisions and acquire all the capital.
List the advantages of being a Sole Trader
- Ease of Formation - the owner just need to submit a registration doc. to the Registrar of Companies
- The owner enjoys all the profit
- Personal control - no consultations needed for decision making
- Personal Service - the owner can vary the hours of work to suit the customers
List the disadvantages of being a sole trader
- There is limited capital to inject
- The owner does not have limited liability
- The owner may not be in a position to hire specialized staff
- May not benefit from economies of scale
- Lack of security for families, customers, and employees
What is a Partnership?
A business legally formed by a minimum of two persons and a maximum of twenty persons
What are the two types of Partnerships?
Limited Liability and General Partnerships
What are the two types of Partnerships
Limited Liability and General Partners
What are the different types of partners?
Ordinary, Sleeping and Limited Liability
Give the advantages of partnerships
- More than one person will be injecting capital into the business
- Better decision making due to shared knowledge
- Specialization as partners can manage different parts of the business
- The workload is shared so there will me more time for leisure and less stress
- The busines will not be dissolved by death or bankruptcy
Give the advantages of partnerships.
- More than one person will be injecting capital into the business
- Better decision making due to shared knowledge
- Specialization as partners can manage different parts of the business
- The workload is shared so there will me more time for leisure and less stress
- The busines will not be dissolved by death or bankruptcy
What are the disadvantages of Partnerships?
- Binding as all partners lose if one makes a mistake
- Difficulty of management when partners disagree
- The risk is concentrated on a few
- Decision making may be slow because of arguments
List the characteristics of a Private Limited Liability Company
- Capital is obtained by private firms, financial institutions, Gov’t agenies or retained profits
- The company must be registered with the Registrar of Companies
- ‘Limited’ must be included in the name
- Membership is between 2 to 50 persons
- Accounting statements must be prepared and an audit undertaken with a copy issued to the Registrar of Companies
Advantages of a Private Limited Company are:
- A larger capital base
- Has continuity and can easily obtain loans from financial institutions
- Separate legal identity from ownership
Disadvantages of a Private Limited Company are:
- Capital is limited
- Must file financial reports with the Registrar of Companies
- Selling of shares is restricted to the Private grouping
Public Limited companies are also known as…
Joint Stock Company
What is the management structure of a Public Limited Company?
The Board of Directors, which is elected by the shareholders, manages the company. The B.O.D appoints an Executive Director or Chief Executive Officer to report to them on the operations of the company.
List the characteristics of a Public Limited Company
- Minimum of seven shareholders
- Shares are traded openly in the stock market
- Must be incorporated
- Can obtain capital from shareholder equity and financial institutions
- Is continuous
Three advantages of a Public Limited Company are:
- Easier to obtain finance
- Shareholders have limited liability
- Shares can be quoted on the Stock Exchange and sold to the public
- Able to grow and obtain from economies of scale
- Changes in shareholders and directors don’t affect the continuity of the company
Disadvantages of a Public Limited Company are:
- Legal requirements may be costly and time-consuming
- Accounts have to be made public
- Decision making takes long
- Differences of opinion may occur
- Control of the company may be lost
What is a franchise?
A form of business where a franchisor grants a franchisee a license to use the established brand and reproduce the product.
