1.5.4 forms of business Flashcards
what is a sole trader and describe what qualities they posses?
this is when a person who is exclusively the business owner.
- they have unlimited liability
- they are there own bosses
- requires a wide range of skills and flexibility
- keep all profits
what is a partnership and what do they include?
when two people come together with joint ownership of a business.
- similar issues with sole traders but with greater shared responsibility, risk, responsibility
what are private limited companies and what are some issues they face
these are companies owned by its shareholders and can only have a limited number of shareholders
- the shareholders have limited liability
- higher status than a sole trader
- access to more capital
what is a public limited company and what are some issues of them
this is a company which offers shares to the general public.
- has limited liability
- can take over other businesses
- can loose control of the business
what is limited liability?
this is where the liability of the owners is detached from the company, legal distinction between owners and business
what is unlimited liability?
This is when there is no legal distinction between a business and a owner.
what is franchising?
This is when a limited company licenses the right for individuals or groups to set up identical operations in a new region
- allows for expansion without taking on direct responsibility
what are some benefits and limitations for the franchisor
benefit
- effective way to grow the business
- franchisor gets a set up and royalty fee
limitation: risk of franchisee damaging brand if not run efficiently
what are some benefits and limitations for the franchisee?
benefit:
-franchisee gets a set up box, plans, marketing and recognized brand
- provided with training and support
Limitations
- expensive set up fees and little freedom to change he business format
- royalty fees have to be paid so all profit is not theirs
give some details of private limited companies
benefits
- limited liability
- easier to raise capital through internal shareholders
- owners may pay less tax than if they operate as a sole trader
limitations
- harder to set up
accounts published and publicly available
- cannot raise large amounts through selling shares publicly
give me some details of public limited companies?
benefit
- huge amounts of money can be made through stock market flotation
- finance easier to raise through issuing sales
- size makes it easier to gain economies of scale
limitations
-accounts openly available to the public
- greater external pressures from the media and pressure groups
- board directors is accountable to the shareholders
what are some other forms of business
social enterprise- mot for profit organizations including cooperatives
lifestyle businesses - a business run to bring in profits to maintain a certain lifestyles
online businesses- could be run as any legal form but only providing business through online means
what is stock market flotation
this occurs when a company goes public and becomes a plc, this means hat the companies shares are offered o the general public.
how are share prices affected
they are affects by the companies performances and the business environment i which it trades. a company share prices could be affected even when currently performing well
what happens when prices rise and fall
positive
- managers receive a bonus
- company finds it easier to raise a capital
-consumer with shares feel more confident to spend
-business receives positive publicity
negative
company may become vulnerable to takeover
- indicates poor performance
- consumer with shares feel les confident to spend
