1.2 Types of business organizations Flashcards
Unlimited liability
If the sole proprietorship fails, the sole tarder is held responsible for all the debts of the business
Disadvantages of Partnership
disagreements and conflict
slower decision making
profits shared
no continuity if 1 partner decides to leave
Sole trader
Business on which one person provides the permanent finance and has full control of the business and is able to keep all the profit
Advantages of partnership
More finance
more ideas
diffenrent skills
continuity( always someone if one partner is unwell)
Partnership
formed by 2 or more people to carry on a business together with shared investments and responsibilities
Private limited company
small to medium sized business that is owned by shareholders who are often members of the same family. This company cannot sell shares to the general public
Public limited company
often a large business, woth the legal rights to sell shores to the general public.
Limited liablity
the only liability, or potential loss, a shareholder has if the company fails is the amount invested in the comany, not the total wealth of the shareholder
Companies / Corporations
Are commercial for-profit businesses owned by shareholders. Hence, the profits of a company are shared among owners.
Private Companies / Corporations
( Advantages and Disadvantages)
Advantages: Better control, more finance can be raised, greater privacy, limited liability, continuity.
Disadvantages: Can sell shares to family, friends (etc.), more expensive to operate, become a target for larger companies to takeover.
Public Companies / Corporations
( Advantages and Disadvantages)
Advantages: Additional finance can be raised, borrow money, limited liability, continuity.
Disadvantages: Lack of privacy, more difficult and expensive to run, always threat that a rival company will make a takeover bid, diseconomies of scale.
For-profit social enterprises
Uses commercial business practices in order to achieve social goals, such as improving the environment, building better communities, and developing social wellbeing.
Cooperatives
For-profit enterprises that are owned and managed by their members.
E.g.: Employee cooperatives, producer cooperatives, managerial cooperatives, and customer cooperatives.
Advantages of cooperatives
Not difficult or expensive to set up, for example, all member shareholders, the owners have equal voting rights, no pressure from external investors or shareholders.
Microfinance providers
are for-profit social enterprises that offer a financial service to those without a job or on very low incomes.
Public-private partnership (PPP)
are jointly established by a government and one or more private sector businesses.
Disadvantages of cooperatives
Difficult to attract investors, managers of cooperatives may lack the financial motivation, very limited sources of finance, unable to hire a range of specialist managers to run the business, a democratic culture is not always effective.
Non-profit social enterprises
Some social enterprises are not run for profit, such as non-governmental organizations (NGOs) and charities.
Charities
operate to serve a humanitarian purpose
exist to help a large range of causes. do not necessarily sell any goods but promote a socially desired cause. → operate in the private sector.
Non-governmental organizations (NGOs)
non-profit social enterprise
operates in the private sector of the economy
it is not part of a government organization
operated by a voluntary group to promote a social cause (protection of human and animal rights, the environment)
