Business Forms Flashcards
What are the two business forms?
This is split into two categories:
Private Sector and Public Sector
The public sector is owned and run by the government whereas the private sector is own by private individuals like you and me.
What are public sector businesses?
What else are they called?
Examples?
These are organisations that are owned and sometimes funded by the government.
Public corporations
Public services
Municipal services
Channel 4 is managed by the government.
Manchester Airport is managed by the local council.
What is privatisation?
The size of the public sector has declined over the last 30 years through privatisation.
Privatisation is when the state(government) sells businesses that they had owned and managed to private individuals and businesses.
Why would the government privatise?
Raises finance for government
Privately run businesses are more efficient
What is a sole trader?
A sole trader is a business that is owned and managed by one person but may employ other people
What are some positives and negatives of being a sole trader?
Positives Negatives
Easy and cheap to set up Unlimited liability
Sources of finance are limited Long hours
Be their own boss Make all decisions
Keep all the profits No continuity
No specialist skills Stressful
Financial information kept private
What is unlimited liability?
Unlimited liability means that there is no distinction between the business and the individual. So if the business was declared bankrupt personal belongings can be taken to pay off any debts.
What are some positives and negatives of being in a partnership?
Positives Negatives
Easy and cheap to start Unlimited liability
No continuity Profits are shared
Specialist skills Additional sources of finance
Must respect partner’s decisions
Financial info kept private Shared workload
Sleeping partner Partners may not agree
How do we get rid of unlimited liability?
You can do this by becoming a company, through the incorporation process.
How can a business become a company?
To set up a company the owners must complete various documents, these are the important 3:
Memorandum of Association
Articles of Association
Register with Companies House
Define these keywords Company Incorporation Shareholder Dividends Limited liability
Company - is a business organisation that has its own legal identity and has limited liability.
Incorporation - is the process of establishing a business as a separate legal identity that allows it to benefit from limited liability.
Shareholder - is an investor in and one of the owners of a company.
Dividends - are a share in the profits of a company that are distributed to the holders of certain types of company shares.
Limited liability - means there is a difference between the company and owner personal assets are not at risk just the investment.
Companies can be split into two categories:
Private limited company (Ltd)
Public limited company (PLC)
How can you measure the size of a PLC?
You can measure the size of a PLC by market capitalisation which is simply the total value of the issued shares of a PLC.
Market capitalisation = share price * number of shares
What are a not-for-profit businesses?
Also known as a social enterprise.
Surprisingly not all businesses are set up to make a profit
Why do people buy shares?
Primarily financial reasons
Increased share price
Dividends from profits
