1b-Types of organisation Flashcards
Q: What is a sole trader?
A: A sole trader is a business owned and controlled by one person.
What are the advantages of being a sole trader?
Easy and inexpensive to set up
Owner keeps all profits
Complete control over decisions
Simple tax arrangements
What are the disadvantages of being a sole trader?
Unlimited liability – personal assets at risk
Limited access to finance
Long working hours
No continuity – the business dies with the owner
Q: What is a partnership?
A: A partnership is a business owned by two or more people who share responsibilities and profits.
What are the advantages of partnerships?
Easy and inexpensive to set up
Shared decision-making and responsibilities
More access to finance than sole traders
More skills available
What are the disadvantages of partnerships?
Unlimited liability (except LLPs)
Disagreements can arise
Profits must be shared
No business continuity if a partner leaves
Q: What is a private limited company (Ltd)?
A: A Ltd is a company owned by private shareholders with limited liability.
What are the advantages of Ltds?
Advantages
Limited liability for owners
Access to more finance
Business continuity
Ownership can be transferred
What are the disadvantages of Ltds?
Disadvantages
More expensive to set up
Must publish financial reports
More regulations than sole traders
Less control as shareholders may have a say
Q: What is a public limited company (PLC)?
A: A PLC is a large business whose shares are sold on the stock exchange.
What are the advantages of PLCs?
Large amounts of capital can be raised
Shareholders have limited liability
Easier to expand and grow
Increased reputation and trust
What are the disadvantages of PLCs?
Expensive legal process to go public
Risk of hostile takeovers
Must comply with strict financial regulations
Profit-driven decisions may harm workers/customers
Q: What is a public corporation?
A: A government-owned business that provides essential services (e.g., healthcare, transport).
Q: What are the advantages of public corporations?
Ensures vital services are available
Protects jobs in key industries
Profits reinvested in public services
Q: What are the disadvantages of public corporations?
Can be inefficient due to lack of competition
Government interference can cause instability
Can be costly for taxpayers
Q: What is a franchise?
A: A franchise is a business where an individual (franchisee) buys the rights to operate under an established company’s brand and system.
What are the advantages of franchising?
Recognised brand name
Training and support provided
Lower risk of failure
What are the disadvantages of franchising?
High start-up costs
Ongoing fees and royalty payments
Franchisee has limited control over business decisions
Q: What is a social enterprise?
A: A business that aims to make a profit while benefiting society or the environment.
What are the advantages and disadvantages of social enterprises?
A:
Good reputation attracts customers
Supports social causes
What are the advantages and disadvantages of social enterprises?
A:
Limited profits available for reinvestment
Slower decision-making due to many stakeholders
Q: What is a multinational company (MNC)?
A: A business that operates in multiple countries, e.g., Nike, Starbucks.
Q: What are the advantages of MNCs?
Creates jobs in different countries
Access to cheaper labour and materials
Spreads technology and investment
Q: What are the disadvantages of MNCs?
Can exploit workers with low wages
Profits often go back to home country
Can dominate local businesses
Q: How do business size and risk influence ownership choice?
Small, low-risk businesses → Sole trader or partnership.
Medium, growing businesses → Private limited company (Ltd).
Large-scale expansion → Public limited company (PLC) or multinational.
Businesses focused on social impact → Social enterprises or cooperatives.
Need for brand recognition → Franchise model.
How do business size and risk influence ownership choice?
Case Study Examples:
Case Study Examples:
A small tutoring business → Sole trader for easy setup.
A growing clothing brand → Ltd for access to finance.
A tech startup with global ambitions → PLC to raise capital.
