AOS 1 Flashcards
Types of Businesses
- Sole trader
- Partnership
- GBE
- Social enterprise
- Private limited company
- Public listed company
Sole Trader Advantages
- Low entry cost and less costly to operate
- Complete control leading to no disputes
- Owner keeps all profits
Sole Trader Disadvantages
- Personal unlimited liability for debts
- Ends when owner dies
- Difficult to run if sick
Partnership Advantages
- Low start up cost
- Less costly than business
- Shared responsibilities
- Pooled funds and talents
Partnership Disadvantages
- Personal unlimited liability
- Liability for all debts, including partner’s debts
- Possibility of disputes
- Divided loyalty and authority
GBE
Government owned business that operates by adopting a company model
Social enterprise
A business that produces goods and services to sell for a profit - but the profit is re-directed to benefit the community and the environment.
Private Limited Company Advantages
- Easier to attract finance
- Limited liability
- Experienced management - board of directors
- Greater spread of risk
Private Limited Company Disadvantages
- Cost of formation
- Taxed on any profits or dividends
- Annual report of audited accounts
- Rapid growth may lead to inefficiencies
Public Listed Company Advantages
- Easier to attract finance
- Limited liability
- Experienced management - board of directors
- Greater spread of risk
- Can attract extra capital by selling shares
Public Listed Company Disadvantages
- Cost of formation
- Taxed on any profits or dividends
- Annual report of audited accounts
- Must abide by stringent compliance rules and disclose corporate financial information
Common Businesses Objectives
- Make a profit
- Increase market share
- Fulfil a market need
- Fulfil a social need
- Meet shareholder expectations
Stakeholders
- Owners/shareholders
- Directors
- Management
- Employees
- Customers
- Suppliers
- Competitor
- Interest Groups
- Government
Shareholders - Stakeholders Interests
- Share holders want a return on their investment through capital gain and improved profits
- Shareholders may not be involved in the day-to-day operations of the business
Owners/shareholders - Stakeholders CSR
- Managers need to be honest about financial reporting and about the business’s future prospects
- Some shareholders will only invest in businesses that are socially responsible
Directors - Stakeholders Interests
Directors of a company also expect to be a fairly remunerated including earning director’s fees and receiving share options
Directors - Stakeholders CSR
Managers need to make decisions that consider the social and environmental impact, not just economic impact
Management - Stakeholders Interests
They expect to be involved in decision making and remunerated fairly.
Management - Stakeholders CSR
- Management expect to work in a business that is ethical and socially responsible
- Make decisions that consider CSR
Employees - Stakeholders Interests
Employees expect fair pay, good conditions, and ongoing employment
Employees - Stakeholders CSR
- Employees should be paid fairly, have job security and career advancement
- They want to carry out work tasks that are ethical and socially responsible
