Flashcards in understanding different business forms Deck (23):
define what private sector is
businesses that are owned by individuals or groups of individuals
what is unlimited liability?
the owner/s of a business a personally liable for the debts of a business e.g a sole trader
define limited liability
the owner/s of a business are only liable for the original amount of money invested into the business e.g. a shareholder
what is a sole trader?
a business organisation that has a single owner
a company is...
an organisation that has a separate legal identity to its owners (shareholders)
a private limited company is...
a company where shares can only be sold privately with the agreement of the other stakeholders
what's a public limited company?
a company where shares can be sold on the stock market and any member of the general public can buy or sell shares
define market capitalisation and the formula for it
the value of all the shares issued by a company.
current share prices x number of issued shares = market capitalisation
what are dividends?
the profit payed out to shareholders
what are not for profit organisations?
these include voluntary and community organisations e.g. local sports clubs, charities etc
they have no shareholders or owners and are run in the interest of their members who are its customers
what are charities?
charitable status means that those who fund them are not liable for any debts. there are tax benefits too
what are the main sources of finance available for private companies?
savings from directors, bank loans
what is the liability for sole traders for their debts of the business?
unlimited liability- responsible for all debt
what's an advantage of a private limited company?
limited liability- owners aren't personally responsible for debt
what's a disadvantage of private limited companies?
they can't sell shares on the stock market to the public
what's an advantage of a public limited company?
they can sell shares in the stock market which can generate more capital
why may a business be reluctant to cut its dividends?
the shareholders would be earning less money and therefore they may face problems if shareholders are unhappy
what happens to market capitalisation if dividends fall?
market capitalisation will also fall
what are social entrepreneurs?
individuals who set up a business (private company) to make a positive change to society and use the profits to achieve their aims
what's an unincorporated business?
a business which has no legal difference between the owners and business itself. as a result, the owners have unlimited liability (sole traders, partnerships)
define an incorporated business
a business where the legal identity of the firm is separate from the owners. as a result, owners have limited liability (private/public companies)