1.4 Choosing the Appropriate Legal Structure Flashcards
Give the meaning of a Stakeholder
An individual or a group of people affected by the business
What is a Internal Stakeholder?
People that work inside the business
What is a External Stakeholder?
People that work outside the business
Give examples of a Internal Stakeholders and describe what they do
Owners:
They are the most important Stakeholders as they decide what happens in the business. Good or Bad decisions depend on what they decide
Managers:
They make the decisions on whether the employees get promotions or bonuses
Workers/Employees:
They are interested in their job security and promotion prospects.
This is improved if the firm is profitable and growing.
Employees would want a decent wage as well as good working conditions.
Give examples of External Stakeholders and describe what they do
Suppliers:
This is where the business buys raw materials from
Customers:
The amount of customers will depend on the quality of customer service
Local Area:
They create more noise, traffic and pollution
Government:
If a business succeeds, they would make more profit so more taxes are paid to the Government
Shareholders:
Share prices goes up
What is a Sole Trader?
An individual that sets up a business on their own
What is a Partnership?
A group of individuals that set up a business and work together
Give the Benefits and Drawbacks of a Sole Trader
Benefits:
Easy to set up
Small Capital Investment means reduced start up costs
Freedom to make decisions
Drawbacks:
Responsibility
Long Hours
Unlimited Liability
Give the Benefits and Drawbacks of a Partnership
Benefits:
There is someone to consult on with Business decisions Shared Expertise Share the Investment Share Workload Share ideas
Drawbacks:
Share Profit
Shared Responsibility
Unlimited Liability
What is the definition of a company?
A type of business owned by shareholders
What do owners of companies have?
Limited Liability
What is Limited Liability?
The company is liable for the debts. NOT its owners
What happens if a company fails?
The shareholders loose their original investment
What can’t Private Limited Companies do?
The owners can’t advertise the sales of their shares and it has to be done privately
