1.5.4 Forms Of Business Flashcards
What are the forms of business
- Sole trader
- Partnerships
- Private limited companies
- Public limited companies
- Social enterprise
- Franchise
- Lifestyle business
- Online business
Sole trader
one person business with unlimited liability
- individual who owns and operates his or her own business (set up by entrepreneur)
- may be employees
- only one to benefit financially
4 ADVS of sole trader
1-no administrative costs / formal rules
2-income = own (profits)=personal satisfaction
3-complete confidentiality
4-less bureaucracy (less legal paperwork)
4 DIS of sole trader
1-unlimited liability
2-limited access to finance for growth
3-long hours of work
4-difficulty to run during ill health
Partnerships
type of business organisation comprising between 2-20 people
pool money/skills/resources/share profit/loss based on partnership agreement/deed of partnership (GENERAL)
-without forming a company
UNLIMITED
4 ADVS of partnerships
1-flexible & easy to set up
2-flow of personal income
3-each partner contributes resources and skills
4-shared workload
4 DIS of partnership
1-little protection/unlimited liability
2-lack of structure
3-easy to fail
4-potential conflict due to clash of interest
Unlimited liability
owners liable for any debts incurred by business
may require selling of assets/possessions = personally bankrupt
Personal possessions of owners are at risk
Limited liability
owners only liable for debts of business , lose no more than sum invested
Owners of business are only responsible to pay back total value invested
(Suing company not investor)
2 ADVS & 2 DIS of forming a limited company
ADV
1-SH= confidence to expand
2-SOF options
DIS
1-financial info public
2-more expensive rules
Private limited company;
Business that sells shares to friends and family
3 ADVS of private limited company
1-limited liability
2-shares to family/friends = trusted circle
3-no risk of hostile takeover
3 DIS of private limited company
1-harder to find funding
2-pay corporation tax
3-no of SH limited to 50
Public limited company
what are the minimum values
Company with limited liability whose securities are traded on stock market bought/sold by anyone
Min SH = 2
Min = 50,00 pounds
4 ADVS of Public limited company
1-capital = selling shares
2-large production scale
3-legal status - benefit publicity
4-limited liability
4 DIS of public limited company
- 50,000 pounds as a share capital
- lose control
- disagree conflict
- publish detailed accounts
flotation
Process of offering a company’s shares for sale on stock market for first time
Social enterprise
focus= put profits -> strong social/env mission social obj rather than monetary
- social problems,
- communities, life challenges & environment
- directly involved in producing goods/services
- social aims/ethical values
- operates as a business
- tradable shares
4 ADVS of social enterprise
1-access to grants
2-doing good socially ethically and environmentally
3-gives opportunities to help others
4-more likely to invest = good cause
4 DIS of social enterprise
1-lack of support structure
2-lack funding
3-monitor market continuous innovation
4-lack public exposure/recognition=less support
Deed of partnership contains info on:
4 things
1-capital invested by each member
2-distribution of future profit
3-rules should a partner leave
4-not compulsory
5 characteristics of Companies:
1-owned by investors SH (owners ) 2-different types of shares (most common =ordinary) 3-separate legal entity 4-limited liability 5-controlled = managers
Seperate legal entity
- Companies can own things such as land equipment
- what share holders own is different compared to what company owns
Dividend (plc):
- payment from profits of company to SH
- cant be payed if no profit
- SH paid a dividend per share
- paid depending on how business organises its financial cycle e.g.quartery
