Types Of Organisations Flashcards
(34 cards)
What is a private limited company?
A company where shares are not available to the general public and are sold privately to known investors
Private limited companies are often designated as Ltd.
What does limited liability mean for owners of a limited company?
Owners’ personal possessions are not at risk; they only lose their investment in the company
This protects owners from personal financial loss due to business debts.
Who are the owners of a limited company called?
Shareholders
Shareholders have one or more shares in the business, indicating their ownership stake.
What documents must all limited companies produce?
Memorandum of Association and Articles of Association
These documents outline the rules of the company, including shareholders’ rights and directors’ responsibilities.
What is the primary aim of private limited companies?
To maximise profits, grow, and perhaps increase market share
This aligns with the competitive nature of the business environment.
Who manages a private limited company?
A board of directors, managed by a managing director
The structure allows for organized governance and decision-making.
What is one advantage of a private limited company?
Owners (shareholders) have limited liability
This protects personal assets from business debts.
What is one disadvantage of a private limited company?
Profits must be split with shareholders by issuing dividends
This can reduce the amount of profit reinvested in the business.
What is a consequence of ownership in a private limited company?
Ownership is not lost to outsiders
This maintains control within the existing group of shareholders.
What is a challenge in setting up a private limited company?
A complicated legal process is required
This can deter some entrepreneurs from pursuing this business structure.
What is a benefit of having an experienced board of directors?
Expertise and business acumen are gained
This can lead to better decision-making and strategic planning.
What must private limited companies do with their financial statements?
Share them with Companies House, making them publicly available
This transparency can impact competitive advantage.
Fill in the blank: In a private limited company, shares are not sold ______.
publicly
This limits the pool of potential investors.
True or False: Private limited companies can freely sell shares to the general public.
False
Shares are sold privately to known investors.
What is a public limited company (PLC)?
A company owned by shareholders with limited liability, controlled by a board of directors, and can sell shares publicly.
PLCs can trade their shares on the stock market.
How do public limited companies differ from private limited companies?
Public limited companies can sell shares publicly through the stock market, while private limited companies cannot.
This distinction allows PLCs greater access to capital.
What are the primary aims of public limited companies?
- Dominate the market
- Increase market share
- Increase market value
Market value is the total value of all their shares.
Fill in the blank: The term ‘limited’ in limited companies refers to _______.
limited liability.
This means that shareholders’ financial responsibility is limited to their investment in the company.
What is a key advantage of public limited companies regarding shareholder liability?
Shareholders have limited liability.
This means that shareholders are only liable for the amount they invested in the company, protecting their personal assets.
How can public limited companies raise finance?
Large amounts of finance can be raised through the public sale of shares.
This allows PLCs to attract a wide range of investors.
Why is it easier for PLCs to borrow finance?
It is easy to borrow finance due to a PLC’s size and reputation, so less risk for banks.
Banks consider PLCs to be lower risk compared to smaller companies.
What market advantage do PLCs have?
PLCs can easily dominate the market.
Their size and financial resources allow them to outcompete smaller companies.
Define a franchise.
A business model that allows businesses to pay a sum of money to own a branch of a well-known, existing business.
The original business is known as the franchiser and the individual branch owner is the franchisee.
Name some well-known franchises.
Some of the best known franchises are:
* McDonald’s
* Subway
* Papa John’s
* Red Driving School
These franchises have established brand recognition and operational support.
