1.5.4 - Forms of Business Flashcards
What is a Sole Trader?
a business organisation which has a SINGLE OWNER
What are 3 Advantages and 2 Disadvantages of SOLE TRADER
+ OWNER keeps ALL the PROFIT
+ QUICK and EASY to SET UP
+ OWNER has COMPLETE CONTROL over DECISION MAKING
- UNLIMITED LIABILITY
- HARDER to RAISE FINANCE
What are 3 Advantages and 2 Disadvantages of SOLE TRADER
+ OWNER keeps ALL the PROFIT
+ QUICK and EASY to SET UP
+ OWNER has COMPLETE CONTROL over DECISION MAKING
- UNLIMITED LIABILITY
- HARDER to RAISE FINANCE
What is a Partnership?
a business organisation that’s usually OWNED by between 2-20 PEOPLE
What are 3 ISSUES that arise in the DEED OF PARTNERSHIP document
- HOW much CAPITAL each Partner will Contribute
- HOW PROFITS (and losses) will be SHARED AMONG the PARTNERS
- HOW much CONTROL each PARTNER has
What are 2 Advantages and 3 Disadvantages of Partnerships
+ SHARED RESPONSIBILITY for DEBT by the Owners
+ SHARED DECISION MAKING by the Owners
- UNLIMITED LIABILITY
- PROBLEMS if PARTNERS DISAGREE
- have to SHARE the PROFITS
What are LIMITED PARTNERSHIPS?
where SOME PARTNERS PROVIDE CAPITAL but TAKE NO PART in the MANAGEMENT of the business
Partner will have LIMITED LIABILITY - partner can only lose the original amount invested
What are 3 Characteristics of LIMITED COMPANIES
has a SEPERATE LEGAL IDENITITY from its OWNERS
RUN BY DIRECTORS who are ELECTED BY the SHAREHOLDERS
CAPITAL is RAISED BY SELLING SHARES
What 2 Documents do you need to Form a Limited Company?
involves Sending some Important Documents to the Registrar of Companies :
the MENORANDUM OF ASSOCIATION
the ARTICLES of ASSOCIATION
if Documents are Accepted, the company Gets a Certificate of Incorporation , Allowing the Business to Trade as a Limited Company
What are 2 Characteristics of PRIVATE LIMITED COMPANIES
LTD
SHARES can ONLY be TRANSFERRED PRIVATELY from ONE INDIVIDUAL TO ANOTHER.
All SHAREHOLDERS MUST AGREE on the transfer and they Can’t be Advertised for Sale
are OFTEN FAMILY BUSINESS owned by FAMILY MEMBERS or CLOSE FRIENDS
What are 2 ADVANATAGES and 2 DISADVANATGES of Private Limited Companies
+ SHAREHOLDERS have LIMITED LIABILITY
+ CONTROL over the BUSINESS CANNOT be LOST to OUTSIDERS
- HAVE to PUBLISH their FINANCIAL INFORMATION
- CANNOT RAISE LARGE amount of MONEY like PLC’S
How does FRANCHING work?
Franchisor, Franchise
FRANCHISOR is Company which OWNS the FRANCHISE
Franchisor ALLOWS Franchisee to USE it’s business IDEAS and METHODS in return FOR variety of FEES
Franchisor PROVDIES a variety of SERVICES
Franchisor PROVIDES a RECOGNISED BRAND NAME which Customers should Recognise and Trust
Franchisor CHARGE a PERCENTAGE of SALES
What are 2 ADVANATEGS & DISADVANATAGES of FRANCHISING for FRANCHISOR?
+ Franchising is a FAST METHOD of Growth
+ is a CHEAPER METHOD of growth as FRANCHISEES takes some of the FINANCIAL RISK
- potential PROFIT is SHARED with FRANHCISEES
- POOR FRNAHCISEES may DAMAGE the BRAND’S REPUATATION
What are 2 ADVANATEGS & DISADVANTAGES of FRANCHISING for FRANCHISEE?
+ Franchises are LOWER RISK, USING an IDEA that’s ALREADY BEEN TRIED and tested
+ Franchisees get SUPPORT FROM the FRANCHISOR
- a Franchisee’s PROFIT is SHARED with the Franchisor
- FRANCHISEES have to SIGN CONTRACTS with franchisors , which can REDUCE INDEPENDANCE , have to abide by strict operating RULES
What are SOCIAL ENTERPRISES?
Organisations that TRADE with the AIM of IMPROVING HUMAN and ENVIRONMENTAL WELL-BEING, RATHER than making PROFIT for external owners
also known as NON-FOR PROFIT ORGANISATIONS
GENERATE most of their INCOME through Trade or Donations
