Types of business organization Flashcards
Limited company
Has limited liability, which means their personal possessions will not be at risk.
Pros: raise more money, cannot lose their possessions, gain economies of scales, protecting a company name
Cons: original founder may lose control, need a minimum capital, shared profits, easy to divorce ownership, inflexible
Unlimited company
Has unlimited liability, fully controlled by 1 or a group of people
Pros: complete control, flexible, receive all business profit, smaller capital needed
Cons: DIY, responsible for all actions, harder to raise capital, life can be at risk
Sole trader
Runs a relatively small business by themselves
Pros: no legal obligations, can take decisions independently, keep more profit, greater flexibility in working hours
Cons: responsible for any debts, hard to raise finance, lack of skills, difficulty to compete with other businesses,
Partnership
Owned by 2 or more people, maximum often 20
Pros: easy to form, easier to raise money, easy to gain cost advantages, can specialize in particular aspects, share decision making
Cons: unlimited liability, disagreements, any decision made can affect the whole enterprise, shared profit, can be sued
Co-operative
Owned by members, who are shareholders, can be both workers and/or consumers
Pros: democratic ownership, limited liability, can be run by customers interest if customers are shareholders, more ethical
Cons: not sold on the stock exchange, hard to raise capital, lack of experience
Franchise
Allows an enterprise to purchase the right to sell a particular product. Includes franchisors (owner) and franchisees (customer)
Pros: easy for marketing and promotions, less risky, saving franchisee money
Cons: depending on each other, strictly controlled by franchisors
Social
Invest profit to the community, has a lot of social impacts. It is based on ethics, eg. charity
