1.4 Type Of Business Organisation Flashcards
Advantage of sole trader
Easy to set up, no paper work is required
Less capital required
Speedy decisions can be made by the owner - few people involved
Personal attention given to business affair
Profits don’t have to be shared
Business affair can keep in private
What is a sole trader
A single owners business, usually small. It can employ workers and it is the most common type of business. Easy to set up and controlled by one person
Disadvantages of sole trader
Unlimited liability endangers personal possession
Finance can be difficult to raise
Don’t have the benefits of large scale production
One owner -> narrow range of skill
Mistake possible because no colleague consult for advice
What is unlimited liability
Any debt that a sole trader builds up has to be paid by the owner
They are personally responsible for all the debts of the business
They might have to sell off their house, car and other possessions in order to pay what they owe
What is limited liability
This limits the debts owed by an individual owner of a company to the sum of money they have put into the business
What is partnership
A business association between two or more owners of an enterprise
Setting a partnership usually involves creating a legal arrangement between the partners
Usually have between 2-20 members
Advantages of partnership
Capital form partners, so more capital available
Larger scale
Members of family can join
Affairs can be kept private
Risks and responsibilities spread among partners
What is sleeping partner
Someone who put money into the business but do not get involve in its running
Disadvantages of partnership
Unlimited liability
Disagreement between partners
Describe private limited company
Shares can only be bought direct form the company with the permission of the board of directors
Usually has a quite small number of shareholders. May be a family run business
Has access to less capital than a public company
Describe public limited companies
Shares can be bought and sold on a stock exchange. Anyone can buy them
Can have a large number of shareholders all over the world
Has access to more capital
Describe franchise
The franchisor is an established enterprise with a well known name and products or services. The franchisor grants a license to a franchisee to produce a product, sell a product or provide the service. The franchisee pays an initial fee to the franchisor and agrees to stick to the condition place on the franchisee. The franchisee will receive training and equipment from the franchisor and they will be expected to share the profit with the franchisor
What is joint venture
Two or more firms set up a business division that will be operated jointly. This avoids the need for a complete merger.
What is multi nationals company
Companies that operate in more than one country
Advantages for multi national companies
Create employment in countries
Help to build up the infrastructure of a country
Spread expertise in new technology to a country
