1.2 Understanding Different Business Forms Flashcards
What are some different forms of business?
Sole trader Private limited company Public limited company Private and public sector organisations Non-profit organisations, such as charities and mutuals.
What is a sole trader?
A business owned and run by an individual, can employ as many people, easier to set up, risky as no distinction between the owner and business.
What liability does a sole trader have?
Unlimited liability
What is unlimited liability?
The owner of the business is liable for all debts that the business may incur and if the debts aren’t paid then the owners assets can be taken away.
What is a private limited company? And examples?
A small to medium-sized business often run by a family or small group of individuals. Shares can’t be sold without the agreement of the other shareholders. The shares are sold privately normally invited individuals and are not sole on stock exchange.
Examples: Poundland, Iceland.
What is a limited company?
An incorporated business, the business has a separate legal identity than its owners.
What liability does a limited company have?
Limited liability
What is limited liability?
The owners of the business are known as shareholders. Allows a business to raise money from selling shares. The shareholders are rewarded by the sale of shares and dividends (sharers of the profit).
What is a public sector organisation? And examples?
These are those owned and run by the government. What they want to do is provide to the general public e.g. NHS.
What is a private sector organisation? And examples?
Those which are owned and run by private individuals. These types of firms will generally set their objective to maximise profit and sales. E.g. Tesco, Sainbury’s, Sony, Ford.
What is a non-profit organisation such as charities and mutuals?
Established for particular social community, environmental welfare or cultural aims and objectives for non-financial gain. Profits reinvested into business.
Charity - main aim is to raise money for a specific cause or purpose.
Mutual - organisations that are owned for the benefit of their current/future member. Main aim is to serve their members customers or employees to contribute to society. E.g. Nationwide mortgages, saving etc.
What is a public limited company?
Must have a capital of or over £50,000, at least two shareholders, two directors and qualified company secretary and usually a large number of shareholders. It’s shares are traded publicly on the Stock exchange. Shareholders can sell their shares whenever they want to and who they want to.
What liability does a public limited company have?
Limited liability
What are examples of a public limited company?
Tesco
Kingfisher
ASOS
