1. Types of Business Organisations Flashcards
What is a Sole Trader?
a business owned , controlled and financed by one person (hairdresser, plumber)
What are the advantages of a sole trader?
decisions are made quickly
profits are not shared
usually local, so can satisfy the needs of the area
no special paperwork is required
the affairs of the business are kept private
What are the disadvantages of a sole trader?
unlimited liability for debts
long hours
finance may be difficult to raise
prices may be higher than those of lager organisations
difficult to provide cover for holidays and illness
What is unlimited liability?
means being responsible for all the debts incurred in the running of the business. may mean that the owner could lose their personal possessions
What is limited liability?
means only losing the amount that you have invested in the business
What is a partnership?
business owned by a minimum of 2 people carrying on business in common with an aim to make profit
What are the advantages to a partnership?
-can raise more capital
-risks and responsibility for the business are spread around partners
-can be a family affair and can still keep affairs private
What are the disadvantages of a partnership?
-unlimited liability for the debts of the business
-formal paperwork required which has to be prepared for each new partnership
-disagreements among the partners on how to run the business
What is a private limited company?
a business owned by shareholders, run by a board of directors and not allowed to sell shares on the stock market.
What are the advantages of a private limited company?
-sharholders have limited liability
-control of the company is not lost to outsiders
-more finance can be raised from shareholders or lenders
-significant experience and expertise brought in by shareholders and directors
What are the disadvantages of a private limited company?
-profits shared
-legal paperwork id required
-shares cannot be sold to the public so raising finance is more difficult than plc
-firm has to abide by the companies act
-must provide companies house with annual accounts available to anyone who requests to see them - affairs not kept private
What is a franchise?
where a new business trades on an already established successful business. (mcdonalds, Pizza Hut)
What are the advantages of a franchise?
-already established name which people recognise
-guaranteed customers
-cost less to set up
-less chance of failure
What are the disadvantages of a franchise?
-have to give a percentage of profits to business owner
-the franchise has to be run according to the rules set by the franchisor
-little scope for personal ideas and methods
What is a non-profit making organisation?
all of the money received by this type of organisation is used to meet its objectives (charities)
