1.2 Types of business entities Flashcards
Public sector
Owned and controlled by the government
Private sector
Portion of an economy not controlled by the government
Private sector
Not controlled or owned by the government
Public sector
Controlled or owned by the government
Sole trader
Business owned and operated by ONE person.
Advantages of a sole trader
Complete control
Flexibility
Privacy
Minimal legal formalities
Close ties w customers
Disadvantages of a sole trader
Established competitors by yourself
Stress or inefectiveness
Limited space for expansion
Limited capital
Unlimited liability
Ceases when owner dies
Partnership
Owned and operated by two or more people
Advantages of a partnership
More knowledge and skills
Greater stability, lower risks
Partners can help
Disadvantages of a partnership
Each has unlimited liability
Less access to loans
No complete control from one
Profits shared
Disagreements
Companies/corporations
The business and the owners are legally separated
Advantages of being a shareholder
Value increases
Profits from dividends
Limited liability
Disadvantages of being a shareholder
Decreased value?
Company may choose not to give the dividends
No impact on company decisions
Privately held company
Shares cannot be traded on a stock exchange
Publicly held company
Shares are traded on some public exchanges
Advantages of a company
Finance is more available
Investors have limited liability
Continuity
Possibilities of expansion
Established structure
Disadvantages of a company
Takes time to set up
Selling shares doesn’t mean there will be finance
Owners risk control of the company
Loss of privacy
No control over stock market
No control over who buys its shares
Social enterprise
A business that advances a social purpose in a financially sustainable way.
For-profit social enterprise
Similar to social enterprise except that it earns a profit which might be distributed to owners.
Cooperative
Social enterprise operated by its members who share the profits
Advantages of for profit social enterprises
Achieved legal status
Strong communal identity
Stakeholder community benefits
Disadvantages of for profit social enterprises
Decision making is complex
Capital may be insufficient for growth or financial strenght
Non-profit social enterprises
Similar to a social enterprise that does not earn profit and provides social service
Advantages of non-profit social enterprises
They help people or causes
Foster positive spirit in the community
Can innovate
Disadvantages of non-profit social enterprises
Intense lobbying can lead to socially undesirable goods
Funding can be irregular
