business enterprise and forms of ownership Flashcards
what is a business enterprise?
a business enterprise is any operations that provides goods or services to meet customer needs with the aim of making profit
eg. cold storage - provide fresh food at convenient locations
what are the forms of business ownership?
- sole proprietorship
- partnership
- public company
- private company
what is sole proprietorship?
its advantages and disadvantages
it is owned by one person, easiest to start, most common form of business enterprise
advantage: quick and easy to set up, minimal registration cost, easy to administer and manage, owner gets to keep the profit
disadvantage: owner personally liable for their debts and losses of business, lack of continuity if something happens to the owner, limited money and management skills
what is partnership
its advantages and disadvantages
owned by 2-20 people coming together with their combined skills, expertise and capitals eg. law and accounting firms
advantages: quick and easy to set up, availability of capital and credits, combined business skills and knowledge, owners keep the profits
disadvantages: unlimited liability, management disagreements because there are more partners and owners with different working styles and expectations, lack of continuity, personally liable debts and losses of business
company
its advantages and disadvantages `
categorised into 2 types - public and private
advantage: limited liabilities, can raise funds for investment and business expansion, the death of owners does not end the company, ease of attracting talented employees
disadvantage: higher start-up costs, possible conflict with shareholders and board of directors
what is public company?
its advantage and disadvantage
more than 50 shareholders
can raise funds by offering shares to the public
more government regulations to comply to
what is private company?
its advantages and disadvantages
between 20 to 50 shareholders
can raise funds among shareholders or through bank borrowing (loans)
