Types of business organisation 1.4 Flashcards
(22 cards)
sole traders
-most common form of business organisation
-its owned and operated by one person
-few legal requirements to set it up
partnerships
- two or more people agree to jointly own a business
- share the profits made
- set up easily
private limited companies
businesses owned by shareholders but they cannot sell shares to the public
public limited companies
businesses owned by shareholders but they can sell shares to the public and their shares are tradeable on the Stock Exchange.
advantages of sole traders
+ few legal regulations
+ he is his own boss
+ freedom to choose holidays, work hours
+ doesn’t have to share business info
advantages of partnerships
+ more capital invested in the business
+ responsibilities of running the business is now shared.
+ both partners are motivated to work hard because they will both benefit from more profits.
advantage of private limited companies
+ shares can be sold to a large number of people
+ all shareholders have limited liability
+ able to keep control as long as they do not sell to many shares to other people
advantages of public limited companies
+ offers limited liability to shareholders
+ has separate legal identity to the owners or shareholders and it is an incorporated business
+ no restrictions on buying, selling or transfer of shares
franchises
its a business based upon the use of the brand names, promotional logos and trading methods of an existing successful business. the franchisee buys the licence to operate this business from the franchisor
joint ventures
two or more businesses start a new project together sharing capital, risks and profits
social enterprises
has social objectives as well as an aim to make a profit to reinvest back into the business.
advantages and disadvantages of franchises for the franchisor
+ franchisee buys a licence from the franchisor to use the brand name
+ the management of the outlets is the responsibility of the franchisee/
+ all sold products must be obtained from the franchisor
- poor management of the franchised outlet could lead to a bad reputation for the whole business.
- the franchisee keeps profits from the outlet.
advantages and disadvantages of franchises for the franchisee
+ chances of business failure is reduced
+ franchisor pays for advertising
+ all supplies are obtained from the franchisor
+ training for staff and management is provided by the franchisor
- less independant
- may be unable to make decisions that would suit the local area.
- license fee must be paid to the franchisor
advantages and disadvantages of joint ventures
+ sharing of costs
+ local knowledge when joint venture
+ risks are shared
- profit has to be shared
+ disagreements over important decisions
+ different ways of running a business
limited liability
liability of shareholders in a company is limited to only the amount they invested
disadvantages of sole traders
- no one to discuss business matters with
- do not have the benefits of limited liability
- if sick, no once can take control of the business
unlimited liability
owners of a business can be held responsible for the debts of the business they own. their liability is not limited to the investment they made In the business
disadvantages of partnerships
- dont have limited liability
- do not have separate legal identity
- partners can disagree on business decisions
unincorporated business
does not have separate legal identity. sole traders and partnerships are unincooperated businesses.
incorporated business
companies that have separate legal status from their owners.
disadvantages of private limited companies
- there are significant legal matters that have to be dealt with.
- the shares in the company cannot be solder or transferred to anybody else without the agreement of other shareholders.
- cannot offer shares to the general public
disadvantages of public limited companies
- more regulations and controls
- selling shares to the public is expensive
- legal formalities are very complicated
