Unit 22 - Forms Of A Business 1 Flashcards
Def: articles association
Document that provides details of the internal running of a limited company
Def: certificate of incorporation
A document that declares a business is allowed to trade as a limited company
Def: cooperative
Form of social enterprise
A business organisation owned by its members who have equal voting rights
Def: deed of partnership
A binding legal document that states the formal rights of partners
Def: franchise
A business model in which a business allows another operator to trade under their name
Def: lifestyle business
A business that aims to make enough money to provide the flexibility needed to support a particular lifestyle for the owner
Def: limited company
A business organisation that has a separate legal entity from that of its owners
Def: limited partnership
A partnership with some members contribute capital and enjoy a share of profit but do not participate in the running of the business
Def: memorandum of association
A document that sets out the constitution and states key external details about a limited company
Def: mutual organisation
Form of social enterprise
A business owned by its members who are customers not shareholders
Def: partnership
A business organisation that is usually owned by between 2 to 20 people
Def: primary sector
Production involving the extraction of raw materials from the Earth
Def: secondary sector
Production involving the conversion of raw materials into finished and semifinished goods
Def: tertiary sector
The production of services in the economy
Def: sleeping partner
A partner that contributes to capital and enjoys the share of the profit but takes no active role in running the business
Def: social enterprise
A business that trades with the objective of improving human or environmental well-being
Def: sole trader
A business organisation which has a single owner
Def: unlimited liability
A legal status which means the owner of a business is personally liable for all business debts
Advantages and disadvantages of a sole trader
Owners keep all profits
Owners have complete control
Simple to set up ( no legal requirements)
Flexible
Unlimited liability
May struggle to raise finance
Work hard long hours small
Can’t exploit economies of scale
Advantages and disadvantages of partnership
Partnership is easy to set up
Partners can specialise in their area of expertise
More owners can raise more capital
Partnership does not have to publish financial information
Unlimited liability
Share profit
May disagree and fall out with one another
Limited growth potential
Advantages and disadvantages of private limited companies
Limited liability
more capital can be raised
Control over business cannot be lost to outside
Have to publish their financial information
Setting up costs have to be met
Profits are shared
Cannot raise large amounts of money
Advantages and disadvantages of franchising as franchisee
Lower risk
Support from franchisor
Set up costs are predictable
Profits shared with franchisor
Lacks independence
Can be an expensive way to start a business
Advantages and disadvantages of franchises as franchisor
Fastest method of growth
Franchisees take some of the risks on their behalf
Franchisees are more motivated than employees
Potential profit shared
Poor franchisee made damage brand reputation
Cost of supporting may be expensive
