A-level Business Studies Lesson 04 (3.1.2) Flashcards
Unincorporated business
There is no distinction in law between the individual owner and the business itself. The identity of the business and the owner is the same. Such businesses tend to be sole traders or partnerships.
Incorporated business
This has a legal identity that is separate from the individual owners. As a result, these organisations can own assets, owe money and enter contracts in their own right. Such businesses include private limited companies and public limited companies.
Unlimited liability
A situation in which owners of a business are liable for all the debts that the business may incur.
Limited liability
A situation in which the liability of the owners of a business is limited to the fully paid-up value of the share capital.
Sole trader
A business owned by one person. The owner may operate on their own or may employ other people.
Private limited company
A business with limited liability. A small to medium-sized business that is usually run by the family or the small group of individuals who own it. It has ‘Ltd’ after the company name.
Public limited company
A business with limited liability, share capital of over £50,000, at least two shareholders, two directors, a qualified company secretary and, usually, a wide spread of shareholders. It has ‘plc’ after the company name.
Ordinary share capital
Money given to a company by shareholders in return for a share certificate that gives them part ownership of the company; ordinary share capital is permanent, so a business will never be required to repay the value of these shares to their owners.
Dividend
A payment made by a company to its shareholders out of profits and. Dividends are allocated as fixed amounts per share, with shareholders receiving a dividend in proportion to their shareholding. When a company earns a profit or surplus, it can reinvest it in the business, distribute it to shareholders, or allocate a proportion to reinvestment and a proportion as dividends.
Market capitalisation
The total value of the issued ordinary shares of a public limited company. Market capitalization is calculated by multiplying the total shares by the current market price of an individual share.
Shareholder
The owner of a limited company: any person, company or other institution that owns at least one share in a company.
Share price
The price of a single share in a company: share prices are usually determined by the supply and demand for shares.
Mutual societies (or mutuals)
Mutual societies exist to provide mutual benefits for their members. They are owned and democratically controlled by their members. The purpose is usually to raise funds from their members or customers, which are then used to provide common services to their members, e.g. building societies, cooperatives.
Charity
A charity is an organisation that has exclusively charitable purposes such as preventing or relieving poverty, or advancing the arts, culture, heritage, and exists for the public benefit. it can’t make profit and all money raised must go toward achieving its stated aims. It can’t have owners or shareholders who benefit from it. A charity is not a legal structure.
