Business Organisations

Question 1

types

Answer 1

sole trader
partnership
private limited company
public limited company
co-op
state owned enterprise
franchise
alliance
transnational company
indigenous firm

Question 2

sole trader

Answer 2

individual who sets up, owns, manages their own business

do not have limited liability

Question 3

advantages of sole trader

Answer 3

easy to set up
keep all profits
accounts do not have to be published
make all decisions

Question 4

disadvantages of sole trader

Answer 4

unlimited liability - if business goes bankrupt, personally responsible, may have to forfeit personal belongings
lack of capital
lack of skills
not a separate legal entity
no continuity of existence

Question 5

partnership

Answer 5

set up, owned and managed between 2-20 owners

combine resources and talents to make profit

Question 6

deed of partnership

Answer 6

how profits are shared
what each partner is expected to do
what salaries each is to be paid
rules for admitting new partners and voting rights
what happens if closes down

Question 7

advantages of partnerships

Answer 7

easy to set up
more capital
more skills and expertise
confidential - accounts do not have to be published

Question 8

disadvantages of partnerships

Answer 8

unlimited liability - jointly and severally liable, may have to individually forfeit personal possessions
slow decision making
profit sharing
not separate legal entity
no continuity of existence

Question 9

private limited company

Answer 9

owned by 1-149 owners
limited liability
name must end in ltd, cannot sell shares to general public
eg eason and son ltd

Question 10

advantages of ltd

Answer 10

limited liability
more capital
workload is shared
less tax
separate legal entity

Question 11

disadvantages of ltd

Answer 11

complicated to set up - must apply for permission, pay fee to registrar of companies, receive cert of incorporation
lack of confidentiality
legal requirements
profits shared

Question 12

articles of association

Answer 12

internal rules and regulations of company
contains:
-share capital breakdown
-voting rights attached to each share
-procedure for calling meeting

Question 13

limited liability

Answer 13

form of legal protection that benefits the shareholders in a company
in event of bankruptcy, a shareholder can only lose a maximum of what they invested
ie lose value of their shares but not private assets

Question 14

memorandum of association

Answer 14

this document governs a company’s relationship with the general public
contains the name, objectives, share capital details and details of directors

Question 15

public limited company

Answer 15

set up by at least 7 shareholders with no upper limit
run by board of directors who are elected at AGM
limited liability, PLC
raise capital by selling shares to public
eg Bank of Ireland PLC

Question 16

advantages of PLC

Answer 16

limited liability
more capital
less tax
high profile - attract media interest, free publicity, attract top employees
separate legal entity

Question 17

disadvantages of PLC

Answer 17

very complicated to set up - cert of incorporation, trading cert
lack of confidentiality
legal requirements
possible takeover

Question 18

shareholders

Answer 18

owners
invest their money
receive share of company’s profit - dividend
vote at AGM for board of directors

Question 19

board of directors

Answer 19

voted by shareholders to run business
make all major decisions
set goals and devise strategies
report to shareholders at AGM
decide dividend they will receive

Question 20

manager director

Answer 20

run company day to day elected by BOD
make sure objectives are achieved
sets out vision, motivate employees
hires senior management + delegates duties

Question 21

auditor

Answer 21

account that must be hired by law to check to ensure accuracy of accounts
totally independent of company
writes report on accounts if fair and accurate

Question 22

co-operative

Answer 22

set up by a group (min 7) who come together and establish an enterprise with the aim of helping one another
run by a committee of management voted in by members
limited liability
application made to registrar of friendly societies, then cert of registration

Question 23

credit union (co-op)

Answer 23

group of people with common bond/interest
save together and lend to another at reasonable level of interest
common bond may be their trade union, area, employer
members borrow for variety of purposes, calculated on the outstanding balance

Question 24

advantages of co-op

Answer 24

limited liability
democratic
incentive/motivation
separate legal entity
continuity of existence

Question 25

disadvantages of co-op

Answer 25

complicated to set up lack of confidentiality legal requirements difficult to raise capital - less incentive to contribute

Question 26

state owned enterprise

Answer 26

businesses owned by irish government on behalf of the people of ireland run by professional managers eg RTE, An Post

Question 27

advantages of state owned enterprise

Answer 27

employment essential services provided develop irish economy - IDA Ireland dividends used to improve services, pay national debt

Question 28

disadvantages state owned enterprise

Answer 28

many make a loss and receive subsidy to cover costs less incentive to keep costs low large loans to repay

Question 29

privatisation

Answer 29

government sells its state owned enterprises and lets private entrepreneurs run them instead can offer its shares for sale to the general public or to one business eg Aer Lingus

Question 30

advantages of privatisation

Answer 30

cash from sale free from political decision making ie more profitable decision making allows company to raise money for development and expansion offer opportunity to make a decent return

Question 31

disadvantages privatisation

Answer 31

higher prices, poorer service, redundancies gov lose its annual dividend only profitable are privatised make decisions for good of company not country

Question 32

franchises

Answer 32

business arrangement whereby the franchiser sells the right to use his/her name, idea or business to others and allows them to set up an exact replica of the business pay large one off fee for permission must obey certain conditions eg McDonalds

Question 33

advantages of franchises

Answer 33

reduced risk economies of scale training and on-going support advertising

Question 34

disadvantages of franchises

Answer 34

cost restrictions damage to image

Question 35

alliance

Answer 35

business relationship where two business agree to co-operate with each other on a single business project remain separate legal entities benefit from sharing costs, expertise, resources eg Mercedes and Swatch make smart car

Question 36

advantages of alliances

Answer 36

cost effective expansion more successful expansion new markets control

Question 37

disadvantages of alliances

Answer 37

disagreements | lose customers

Question 38

transnational companies

Answer 38

``` company with a head office in one country and branches, business operations or factories in a number of other countries IDA attract based on: -low corp tax -access to grants -access to EU markets -skilled workforce -english language ```

Question 39

advantages of transnational companies

Answer 39

``` employment new technology competition tax spin off effect exports ```

Question 40

disadvantages of transnational companies

Answer 40

closures repatriation of profits political pressure conflict of interest

Question 41

indigenous firms

Answer 41

businesses set up, owned and managed by irish people main place of business is ireland will sell their products at home and possibly export mostly small and medium sized eg Lily O'Briens, Supermacs

Question 42

advantages of indigenous firms

Answer 42

employment loyalty enterprise culture profits

Question 43

changing trends in ownership and structure

Answer 43

``` co-ops becoming PLCs privatisation increasing popularity of franchises nationalisation eg AIB during recession alliances eg bord gais and tesco ```

Question 44

why businesses change their organisational structure over time

Answer 44

``` to raise capital to lower risk faced by owners increase sales and profit acquire skills continuity of existence ```