3.1.2 Flashcards
forms of business ownership and factors impacting share price
what is a private limited company (LTD) ?
- share holders are usually family and/or friends
- must register at Companies house
- have LTD at the end of company name
- limited liability
what are the pros of a private limited company (LTD) ?
- limited liability
- better control as shareholders known to you
- can raise capital by selling more shares to friends and family > makes it easier to expand
- the business has its own legal status > separate from shareholders
- can employ managers
what are the cons of a private limited company (LTD) ?
- public info e.g. finances
- may not have individuals able to invest
- more difficult and expensive to set up, more administration
- cannot sell shares on stock exchange limiting the amount of capital that can be raised
what is a public limited company (PLC) ?
- businesses owned by shareholders
- shareholders bought their shares through public stock exchange
- anyone can be a shareholder
- limited liability
what are the pros of a public limited company (PLC) ?
- limited liability
- can sell shares to the public to raise capital more quickly enabling rapid growth
- shares can be traded on the stock market
- banks and investors are more likely to lend more cash
what are the cons of a public limited company (PLC) ?
- unable to choose who stockholders/shareholders are
- risk of hostile takeover
- going public is expensive
what is a partnership company?
- 2 or more people share financial risk and invest their own money
- unlimited liability
- e.g. garden maintenance
what are the pros of a partnership company?
- more opinions to support decision and shared responsibility
- more capital/better networking (making connections and building relationships)
what are the cons of a partnership company?
- unlimited liability
- arguments can occur when decision making
what is a sole trader?
- one person sets up a business
- can have employees
- unlimited liability
- e.g. independent window cleaner
what are the pros of a sole trader?
- all profit is kept by the owner
- own boss
- make decisions quickly
- less capital needed
- easy to set up
- can offer personal attention to customers
- information about the company can be kept private
what are the cons of a sole trader?
- unlimited liability
- difficult to raise money, seen as a risk by lenders
- don’t have economies of scale (buying in bulk)
what is unlimited liability?
- each business owner is equally responsible for the debts of the company.
- to pay off these debts, personal assets of the business owner can be used
what is limited liability?
owners of the business has no personal liability for business debts
why doesn’t every company become a limited company?
- greater financial exposure due to publishing all financial info
requires shareholders and therefore dilutes ownership - challenges in becoming a limited company due to additional legislation and funding required
what happens when share prices rise?
- positive publicity
- shareholders feel more confident
- managers may receive a bonus
- easier to raise capital
what happens when share prices fall?
- indicates poor performance
- shareholders less confident to spend
- vulnerable to a takeover
- harder to raise capital
what is share price?
the value a share is worth
what factors influence share price?
- announcing business profits
- announcing job losses
- takeovers
- economy
- incorrect data being published
what is a public sector?
- owned by the government
- provide goods and services for the benefit of the community
- taxes paid by UK citizens and businesses go towards paying for public sectors
what is a private sector?
- any for-profit business
- run by individuals or companies
what is an unincorporated group?
an organisation set up through an agreement between a group of people who come together for a reason other than to make profit
what is a non-profit organisation?
a business which has a social objective at it’s heart and puts all retained profits into helping the cause, rather than distributing dividends to shareholders
- run by a network of volunteers, donor and the local community
what is a social enterprise?
businesses that trade for a social or environmental purpose
- objectives = to benefit society or the planet in some way
