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Business > 1.4 Types Of Business Organisation > Flashcards

1.4 Types Of Business Organisation Flashcards

1
Q

Define sole trader

A

A business owned by one person

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2
Q

Advantages of sole trader

A
  • freedom, full control
  • able to keep secrecy
  • more profit, not shared
  • fewer legal regulations
  • no conflict
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3
Q

Disadvantages of sole trader

A
  • unlimited liability
  • less money to expand the business with
  • business likely to remain small
  • unincorporated business
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4
Q

Define partnership

A

A form of business in which two or more people agree to jointly own a business

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5
Q

Advantages of partnership

A
  • more capital can be invested for expansion
  • shared responsibility
  • better decision making since it’s shared
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6
Q

Disadvantages of partnership

A
  • unlimited liability
  • unincorporated business
  • possible conflicts/ disagreements
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7
Q

Define private limited company (LTD)

A

Businesses owned by shareholders but they cannot sell shares to the public

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8
Q

Advantages of private limited company (LTD)

A
  • limited liability
  • in control of who buys shares
  • easier to raise capital
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9
Q

Disadvantages of private limited company (LTD)

A
  • shared profits
  • shares not sold to general public
  • if shareholder sells shares it takes time to find a new shareholder
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10
Q

Define public limited company (PLC)

A

Businesses owned by shareholders but they can sell shares to the public

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11
Q

Advantages of public limited company (PLC)

A
  • limited liability
  • incorporated business
  • able to sell shares to public
  • no restriction on buying, selling or transfer of shares
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12
Q

Disadvantages of public limited company (PLC)

A
  • complicated legal formalities
  • more regulations and controls
  • expensive to sell shares to public
  • owners may lose control of business
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13
Q

Define joint venture

A

Where two or more businesses start a new project together, sharing capital, risks and profits

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14
Q

Advantages of joint venture

A
  • shared costs
  • shared risks
  • shared knowledge
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15
Q

Disadvantages of joint venture

A
  • shared profits
  • possible conflicts/ disagreements
  • possible different cultures
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16
Q

Define franchise

A

A business based upon the use of the brand names, promotional logos and trading methods of an existing successful business

17
Q

Advantages of a franchise to the franchisor

A
  • licence bought by franchisee
  • fast expansion
  • all products sold must be obtained from the franchisor
18
Q

Disadvantages of a franchise to the franchisor

A
  • poor management can lead to bad reputation of the business
  • franchisee keeps profits from the outlet
19
Q

Advantages of a franchise to the franchisee

A
  • Less likely to fail, as is well known
  • advertising paid for by franchisor
  • fewer decisions to make
  • worker training is paid for by franchisor
  • relatively low risk so banks more willing to loan money
20
Q

Disadvantages of a franchise to the franchisee

A
  • Less independence
  • License fee to be paid to franchisor
  • Unable to make decisions to suit local area
21
Q

Define unincorporated business

A

A business that does not have a separate legal identity from its owners

22
Q

Define limited company

A

Companies that have separate legal status from their owners

23
Q

Explain difference between an unincorporated business and a limited company

A

Incorporated (limited) has separate legal status whereas unincorporated does not

24
Q

Risk, ownership + liability of sole trader

A

R: carried by sole owner
O: one person
L: unlimited liability

25
Q

Risk, ownership + liability of partnership

A

R: carried by all partners
O: several partners
L: unlimited liability

26
Q

Risk, ownership + liability of private limited company

A

R: shareholders up to their original investment
O: shareholders
L: limited liability

27
Q

Risk, ownership + liability of public limited company

A

R: shareholders up to their original investment
O: shareholders
L: limited liability

28
Q

Define public corporations

A

A business in the public sector, owned and controlled by the government

29
Q

Advantages of public corporations

A
  • important services available to the public
  • less likely for business failure
  • less competition
  • thought to be essential for some industries
30
Q

Disadvantages of public corporations

A
  • no private shareholders so less profit motive
  • can lead to inefficiency if feel too safe
  • lack of incentive to increase consumer choice

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