1.4 Types of Business Flashcards
Unit 1: Understanding Business Activity
Public Limited Company
Business owned by shareholders, that can sell shares to the public on the stock exchange
Sole Trader
The single owner of an unincorporated business. Can employ workers, but only they invest and own the business.
Public Sector
The part of the economy owned and controlled by the government
Objectives are to improve country and provide services
Limited Companies/Incorporated Business
Have separate legal identity to its owner(s) / limited liability (public/private limited company)
Sale of shares
Continuity
Unincorporated Business
Often a small firm where owners and the business have the same legal identity and they are responsible for debts with unlimited liability (sole trader, partnership)
No shares to sell
No continuity
Sole trader Advantages
Easy to set up
Full control
Owner receives all profit
Minimal paperwork to set up
Sole trader disadvantages
Unlimited liability
Full responsibility
Lack of capital
Lack of continuity
Partnership
Legal agreement between two to around twenty people to own and run a business and share all profits
Partnership Advantages
Easy to set up
Shared skills and ideas
More capital investments
Shared costs
Partnership Disadvantages
Conflicts
Unlimited liability
Share profits equally no matter contribution
No continuity
Franchises
The owner of a business (franchisor) grants a licence to another person or business (franchisee) to use their business idea
Franchises advantages
Fast to expand
Receives a fee
Receives a share of profits
Franchisees have access to local knowledge
Franchises disadvantages
Wrong descicion damages franchisor reputation
Need to provide training
Need to buy a license
Joint ventures
Two or more businesses start a single new project together, sharing capital, risk, and profits
Joint ventures adv
Reduced risk and cuts cost
Different expertise
Shared knowledge
