1.2 Types of Business Entities Flashcards
what is a share in business?
certificate confirming part ownership of a company and entitling the shareholder to dividends
what is a shareholder?
person or institution who owns shares in a company and are owners
what are the general characteristics of privately held companies and publicly held companies?
- businesses and owners are legally separate (limited liability) 2. A company is legally recognized as having an identity separate from its owners 3. there are shareholders 4. company employs people/executives to manage the business and employees to handle the day to day activities of the business. this is overseen by a board of directors.
what are the two types of companies/corporation?
publicly held and privately held
what are some disadvantages of a partnership?
Characteristics of the public sector?
run and controlled by the government, funded by government, provide essential services, usually has a social purpose (benefits citizens in some ways)
Characteristics of the private sector?
run and controlled by individuals, funded by individuals, provide products and services that fulfill wants and needs, focused on profit but can also have a purpose
What type of enterprise is a sole trader?
for profit enterprise
what type of enterprise is a partnership?
for profit enterprise
characteristics of the public sector?
run and controlled by government, funded by government, provide essential services, usually has social purpose (benefits citizens)
characteristics of private sector?
run and controlled by individuals, funded by individuals, provide services and products that fulfill wants and needs, focused on profit but can also have a profit
what type of business is a privately held company?
For-profit enterprise
what type of business is a publicly held company?
for- profit enterprise
what type of business is a cooperative company?
for profit social enterprise
what type of business is a public sector company?
for profit social enterprise
what type of business is an NGO?
Not for profit enterprise
what is Limited liability ?
investors can only lose the money they invested but not personal property or money
what is unlimited liability?
investors can lose their personal property and money to help pay the debts of the company
what is a sole trader?
individuals who own and run their own business but can have employees
what are the advantages of being a sole trader?
one person owns it, complete control of business decision making, flexibility in terms of working, easy to set up, close contact with costumers
disadvantages of being a sole trader?
unlimited liability, sources of finance limited, usually working long hours and limited vacation, lack of continuity if something happens to the owner
what is a partnernership?
group of two or more people who run a business together. could be friends, associates, or people with similar skills.
what are some advantages of a partnership?
partners bring different skills that help the business, partners can cover each other in case of illness or holidays, access to more finance
what are some disadvantages of a partnership?
unlimited liability, must share profits, responsible for partners actions, may disagree over business decisions
what are the two different types of companies?
Privately held and publicly held
what is a shareholder?
person or institution that owns shared in a company and are owners
Sole traders and partnerships what is a characteristic they share?
they own and run their business
What is a privately held company?
business that has shareholders who are invited to buy shares by existing owners. shares are not traded on the stock market.
advantages of a privately held company?
limited liability, easier to raise finance, management s shared and experts are hired
disadvantages of a privately held company?
shares can’t be sold on the stock market, limited amount of shares can be sold, can be expensive to set up, more information needs to be shared with the government and published for others to see
what is a publicly held company?
private sector businesses often large that sell their sales on a stock exchange. anyone is able to buy shares .
advantages of a publicly held company?
limited liability, easier to raise finance, shares are sold on stock market, management is shared and experts can be hired
disadvantages of privately held companies?
profits shared with shareholders via dividends, record need to be publishes annually for everyone to see, company is vulnerable to a takeover, can have communication issues due to how large the company is
what is an IPO
are publicly held companies and public sector companies the same?
no
what is for profit social enterprise?
businesses that don’t solely focus on profit
what are social enterprises?
focus on more than just business profit. through their business they try to improve society the environment, employ people. profit generated is also used to invest in social goals.
what are the aims of social enterprises?
economic: make profit, social: provide jobs or support for local communities, environmental: protect the environment
what is the triple bottom line?
the aims of social enterprises
what is a cooperative?
run and owned by members. members can be employees, costumers, residents.
advantages of a cooperative?
more democratic than other organizations, social aims take precedence over profit, benefits the members and local community
disadvantages of a cooperative?
decision making is time consuming and difficult, difficult to raise capital, can be disagreements amongst members
what is a non profit social enterprise?
organizations that don’t seek profit
what is an NGO?
organization that isn’t owned and operated by the government and has a social cause.
what are the general features of an NGO?
profits are not generated but surpluses are used to advance the cause of the organization, NGO´s can be political or non political, can be created for single events or long term projects, donations are very important and sometimes infrequent, ownership is unclear and can cause unclear direction of business.
more general features of an NGO?
non profit enterprise, operates in the private sector of the economy and has a social cause, not operated by government, charities can be a type of NGO, run by voluntary group to promote a social cause
advantages of an NGO?
benefit local communities, exempt from paying taxes, qualify for government assistance, positive impact on employees and donors
disadvantages of an NGO?
strict guidelines and restrictions that non profit social enterprises must follow, depend on the goodwill of the general public and donors to fund, lack of financial and cost control as they’re not expected to earn a profit for their owners or shareholder, wages lower
