1.2 Types of organisations Flashcards
define sole trader
a single person who is the exclusive owner of a business
give an advantage of sole traders
- easy to set up
- get to be their own boss
- can decide what to do with profit
- easy to change legal structure
give a disadvantage of sole traders
- unlimited liability,
- hard to get a loan ~ seen as risky,
- all responsibility for making decisions is on one person,
- harder to retain good employes
define partnership
a business owned by 2 to 20 partners
give an advantage of partnerships
- more experience and ideas
- easier to raise money ~ seen as less risky than sole traders
- good employees can become partners, easier to retain
give a disadvantage of partnerships
- profits are shared
- unlimited liability
- may have disagreements
- each partner is liable for the actions of other partners
define public limited company (PLC)
companies that sell shares on the stock exchange
give an advantage of public limited companies
- limited liability
- raise money faster by selling shares on stock exchange
- easy to raise capital from banks - seen as less risky
give a disadvantage of public limited companies
- owners have little say in how the business is run
- anyone can take over if they buy more than half the shares
- company’s accounts must be made public
define private limited company
companies where ownership of shares is restricted
give an advantage of private limited companies
- limited liability
- retain control in managing the business - restricted ownership as all shareholders must agree to sell shares
- easier to get a loan - seen as less risky
give a disadvantage of private limited companies
- finance is needed for upfront fee and costs of paperwork to incorporate the business - not accessible to smaller firms
- company’s accounts must be published
define public corporation
business owned and controlled by the state/government
reasons for public ownership (public corporations)
- avoid wasteful duplication
- maintain control of strategic industries
- save jobs
- fill gaps left by private sector
- serve unprofitable regions
reasons against public ownership (public corporations)
- cost to government
- inefficiency
- political inference
- difficult to control
define stakeholders and give an example
an individual or group with an interest in the operation of a business
e.g. owners, customers, employees, managers, suppliers
define shareholders
owners of limited companies
define franchise
structure in which a business (franchisor) allows another operator (franchisee) to trade under their name
give an advantage to a franchisor
- fast method of growth
- cheap
- franchisee take some of the risk
- franchisees more motivated than employees
give a disadvantage to a franchisor
- potential profit is shared with franchisee
- poor franchisees may damage brand’s reputation
- franchisees may get their merchandise from elsewhere
- cost of support for franchisees may be high
give an advantage to a franchisee
- less risk - a tried and tested idea is used
- back up support is given
- set up costs are predictable
- national marketing may be organised
give a disadvantage to a franchisee
- profit is shared with franchisor
- strict contracts have to be signed
- lack of independence - strict operating rules apply
- can be expensive
define social enterprise
business that aims to improve human or environmental well-being, e.g. charities
define mulitnational
a large business with significant production in or service operations in at least two countries
