4️⃣ Flashcards
SOLE TRADERRR
owned and controlled by just one person who takes all the risks and receives all the profits
- unincorporated biz
- if owner dies biz ends
sole trader pros?
- quick ez setup, few legal formalities
- owners make all decisions
- keep all profits
sole trader cons?
- unlimited liability (if biz cant pay off debts, owner sell car)
- limited capital
- heavy workload alone
PARTNERSHIPPP
2-20 ppl do biz together with a view to make profits
- unincorporated biz
- requires anpartnership agreement (document that all partners sign, forms partnership)
- if partner dies partnership ends
partnership pros?
- ez setup, few legal formalities
- shared workload
- more capital
partnership cons?
- unlimited liability
- disagreements
- profit must be shared
LIMITED (ltd) companies
- can sell shares to raise capital
- shareholders elect BOD to manage and run company during AGM
- incorporated biz
unincorporated biz
- no separate legal identity
- if debt, personal assets can be lost
- unlimited liability
- sole trader, partnership
incorporated biz
- separate legal identity for biz and owners
- if debt, only capital invested can be lost
- limited liability
- ltd companies
private ltd
company that does not sell shares to the public
public ltd
company that sells shares to the public on the stock exchange
private ltd pros
- limited liability
- more control (privately owned shares)
- continuity
private ltd cons
- hard to setup (legal formalities)
- required to publish all financial info
- cant sell shares to public, limited capital
public ltd pros
- limited liability
- raise a lot of capital
- easier expansion
public ltd cons
- hard to setup (legal formalities)
- legally required to publish all reports
- lose control (if owners sell most shares, they might lose ablt to make decisions, hostile takeover chance)
FRANCHISE
joint venture between franchisor and franchisee
franchisor pros?
- fast low cost low risk expansion
- franchisees provide their own funding
- income from franchisee through franchise fees and royalties
franchisor cons?
- loss of control over running the biz
- if one franchise does badly affects repo
- cant keep all profits
franchise fees vs royalties
franchise fees: initial fees paid to franchisor for the right to operate franchise
royalties: a percentage of revenue for using brand and support
franchisee pros?
- low chance of failure
- established brand, customer trust
- support and advice from franchisor
franchisee cons?
- high costs
- less independence follow franchisor rules
- portion of earnings goes to franchisor
joint venture
when 2 or more biz start a project sharing capital risks and profits while remaining two separate entities
(just a collab w a fancy name)
joint venture pros?
- shared knowledge
- shared risks
- shared costs
joint venture cons?
- mistakes reflected on both biz
- difference in goals/styles, lead to conflicts
- must consult partners b4 making decisions
public corporation
biz owned by gov, run by gov-appointed directors
e.x. public transport, electricity/water supply
public corps pros?
- provide essential services
- supported by gov (funds etc)
- no competition
public corps cons?
- motivation not so high (profit not the objective)
